Due to its proximity to China, Vietnam has become a new semiconductor manufacturing "friendshoring" location for the US. DIGITIMES Research finds that Vietnam's semiconductor industry shows a development trend of manufacturing in the North and IC design in the South. The infrastructure, government policies, water, electricity, and human resources are issues for manufacturers setting up businesses in the country, according to DIGITIMES Research's latest report covering the potential of Vietnam's semiconductor industry.
As the US-China technology war rages on, the US government seeks to decentralize semiconductor manufacturing to avoid risking over-concentration. As a result, a "China+1" investment strategy has taken shape for the technology industry. In response to the US including Vietnam as a friendly offshore outsourcing partner, the Vietnamese government upgraded its relationship with the US to a comprehensive strategic partnership in September 2023 to create a favorable environment for collaboration in the semiconductor industry.
According to DIGITIMES Research's findings, the distribution of the semiconductor industry clusters in Vietnam shows that the makers in the northern part of the country are in memory manufacturing, packaging, and testing. The manufacturers in Southern Vietnam are mainly IC backend and design houses. However, due to the constraints in production scale, land transportation, and networking policies, no major clusters incorporating upstream and downstream players have appeared.
In terms of investment incentives for developing the semiconductor industry, Vietnam, limited by tight government budgets, focuses on reducing the taxation burden on the industry, with few policies for providing subsidies. Regarding water and power supply, the tropical country has abundant water sources and relies heavily on hydropower. But in recent years, droughts in the northern part of the country have affected hydropower generation. Hydropower and thermal power generation account for more than 70% of Vietnam's total electricity generation, and there is still a need to diversify the sources of electricity.
In terms of talent supply, Vietnam has seen a rise in the number of students enrolled in Science, Technology, Engineering, and Mathematics (STEM) programs at tertiary institutions in recent years, with the majority of them joining the job market after receiving their bachelor's degrees. The rise in the number of graduates with master's and doctoral degrees has been slow.
