Vietnam becoming a chip-making powerhouse
Global semiconductor makers piling into Vietnam to decouple from China and eschew much higher Western wages
Vietnam is becoming an important new player in the global semiconductor industry, a decoupling beneficiary of the US-led chip wars against China.
Vietnam’s well-educated and highly motivated engineers work for comparatively low wages, attracting various semiconductor packaging and design companies from the US, Germany, Japan, South Korea and Taiwan.
With a technology-oriented industrial development policy, Vietnam is following in the footsteps of Malaysia, currently the world’s sixth-largest semiconductor exporter and with 13% of the global assembly, testing and packaging industry, according to ISIS Malaysia, a think tank.
This will no doubt please the Biden administration, which has been promoting Vietnam as an alternative to China under the US-Vietnam Comprehensive Strategic Partnership, though the trend would probably be happening anyway.
Market research organizations calculate that Vietnamese engineers are paid about US$8,000 per year, about half the amount engineers command in Malaysia. Those figures are $34,000 in South Korea, $46,000 in Taiwan, $50,000 in Japan and $68,000 in Singapore.
Semiconductor industry sources say annual salaries for design engineers with less than three years of experience range from $10,000-$15,000 in Vietnam versus $65,000-$70,000 in the US.
Even allowing for faulty data and exchange rate volatility, salaries in Vietnam and Malaysia are so far below those of the “good-paying union jobs” touted by the Biden administration that there is little chance of closing the gap in the foreseeable future.
This explains why Intel’s largest integrated circuit (IC) assembly, packaging and test facility is located in Vietnam and its largest advanced 3D packaging facility is in Malaysia.
Germany’s largest semiconductor maker, Infineon, has established a product development team at its new office in Hanoi, which was opened in June of last year.
At the time, the CEO of Infineon Technologies Asia-Pacific, C S Chua, told Vietnam Investment Review, “With a burgeoning and youthful population of nearly 100 million, Vietnam has swiftly transformed into a coveted destination for multinational corporations seeking to tap into a pool of exceptional technical talent.”
Senior Infineon executive Hartmut Hiller added, “The new development center in Hanoi will facilitate Infineon Technologies’ ability to meet the escalating demand for functional testing and customized circuit design, particularly for our industry-leading System-on-Chip (SoC) solutions.”
Earlier this month, Infineon started producing silicon carbide power semiconductors at its new factory in Malaysia, which has the experienced workforce and supporting infrastructure that Vietnam is now building. Ensuring reliable supplies of electricity and water is an ongoing issue as the Vietnamese semiconductor industry expands.
Renesas Electronics, Japan’s largest integrated semiconductor device manufacturer, has been in Vietnam since 2004, when it established a design team in Ho Chi Minh City. Renesas Design Vietnam is now the company’s largest design center outside Japan. Renesas has also established semiconductor design courses at Vietnamese universities.
South Korean IC design companies BOS Semiconductors, which works with Hyundai, and CoAsia, which works with Samsung, have R&D centers in Vietnam.
Samsung Electro-Mechanics, Hana Micron Vina and Hanmi Semiconductor manufacture package substrates, printed circuit boards and semiconductor packaging equipment, respectively, in Vietnam.
Taiwanese semiconductor design companies GUC and Faraday Technology have design centers in Vietnam while Alchip Technologies is planning to establish one. GUC and Alchip are affiliated with Taiwan’s world-leading TSMC.
Taiwanese investment bank FCC Partners is working with Vietnam’s FPT Software to establish a Vietnam Semiconductor Development Fund.
Vietnam also has its own semiconductor design companies, including FPT Semiconductor and VN Chip. With the support of universities, start-up incubators, large corporations and financial institutions, high-tech industrial parks, tax incentives and subsidies, more can be expected.
The Vietnamese government has set a goal of training 50,000 semiconductor engineers by 2030. That is about ten times more than the country has today, according to Associate Professor Truong Viet Anh of the Hanoi University of Science, as reported by VnEconomy.
But the largest foreign presence in the Vietnamese semiconductor industry, far and away, is American. In addition to Intel, US companies with operations in Vietnam include Microchip, Marvell, Qualcomm, Synopsis, Cadence, Savarti, Uniquify and Amkor.
Marvell, which specializes in data infrastructure semiconductor solutions, expects Vietnam to become its third-largest design center after the US and India.
Microchip, which makes microcontrollers, mixed-signal, analog and other devices, develops chips for the auto, industrial, aerospace and defense, communications, computing and consumer markets in Vietnam.
Qualcomm established a presence in Vietnam in 2003 and has since worked with network operators and the government to introduce mobile telecom technology from 2G to 5G. The company runs the annual Qualcomm Vietnam Innovation Challenge for start-ups with the support of Vietnam’s Ministry of Science and Technology.
Synopsis, the world’s top electronic design automation company, has more than 500 employees at several locations in Vietnam. In 2023, the company signed MOUs with the Da Nang People’s Committee to support the Da Nang IC Design Incubation Center; with the Vietnam National Innovation Center (NIC) to develop IC design expertise; and with the Authority of Information and Communication Technologies Industry to support the establishment of a semiconductor research institute.
The NIC also announced a collaboration with Synopsis competitor Cadence last year to accelerate IC design innovation in Vietnam. Under the agreement, Cadence design tools are provided to Vietnamese universities, training centers and start-ups. The NIC also reached an agreement with Arizona State University to develop semiconductor-related training and research programs.
US semiconductor design companies Savarti and Uniquify have established R&D centers in Vietnam, with Savarti specializing in analog and mixed-signal devices and Uniquify in system-on-chip (SoC) design.
Amkor, the world’s second-largest provider of outsourced semiconductor assembly and test (OSAT) services, opened its first factory in Vietnam in October 2023. Located in the Yen Phong Industrial Park in the province of Bac Ninh, near Hanoi, it is a “state of the art” factory, according to Amkor CEO Giel Rutten. “The kind of secure and reliable supply chain our customers need—in communications, automotive, high-performance computing, and other key industries,” he added.
The US Department of Commerce had a secure supply chain in mind on July 26 of this year when it signed a non-binding preliminary memorandum of terms with Amkor to support the construction of the company’s first OSAT factory in the US with up to $400 million in direct funding, loans and tax credits under the CHIPS Act. A $2 billion investment in advanced packaging capability, it is expected to create about 2,000 jobs in Arizona.
“Accordingly,” writes the US Commerce Department, “companies such as TSMC, Apple, and GlobalFoundries–which power the world’s most advanced technologies–will be able to package and test their essential chips domestically, enabling the full end-to-end cycle of the chip manufacturing process to occur in the United States.”
However, the CHIPS Act also includes financial support for the semiconductor industry in Vietnam and elsewhere overseas under the $500 million International Technology Security and Innovation (ITSI) Fund.
As such, Amkor’s new factory in Bac Ninh may eventually employ about 10,000 workers when it reaches full capacity, according to a Vietnam+ report.
US Secretary of Commerce Gina Raimondo was no doubt right when she said that “this proposed funding would enhance our supply chain security.” But it looks like it will create a lot more jobs in Vietnam than in the US.
By Scott Foster – Asia Times – August 26, 2024