US Chipmakers March South as Vietnam Subsidizes Its Tech Future
[Chip Capitols back in The Diplomat] Just as Vietnam discerns its role in US-China relations, Hanoi’s policymakers are looking for their niche in global chipmaking🇻🇳
The Diplomat kindly published another of my articles, this one on Vietnam’s semiconductor subsidies. With US President Joe Biden having just visited Hanoi, I sought to connect Vietnam’s efforts to find a foothold in the chip industry to its ongoing effort to define itself in a geopolitically multipolar world. Here is an excerpt, and the full piece is available here.
For more of Chip Capitols’ coverage on global subsidies, check out any of these articles: China🇨🇳, the European Union🇪🇺, Korea🇰🇷, Taiwan🇹🇼, and France🇫🇷. Stay tuned for more deep dives.
US Chipmakers March South as Vietnam Subsidizes Its Tech Future
Just as Vietnam comes into its unique role in China-U.S. relations, Hanoi’s policymakers are trying to find their niche in the global semiconductor industry.
President Joe Biden’s visit to Hanoi on September 10 inaugurated deeper ties across the board between the United States and Vietnam, but nowhere did the two countries have more concrete successes to laud than in the semiconductor industry. American chip executives looked on as Biden announced AI projects by Nvidia and Microsoft, new semiconductor design centers in Ho Chi Minh City by Synopsys and Marvell, the October opening of a $1.6 billion Amkor chip packaging facility near Hanoi, and a new U.S.-Vietnam chip partnership to “support resilient semiconductor supply chains.”
Many of these expansions continue a trend of American and other leading chip companies diversifying their supply chains away from China. While Vietnamese leaders certainly recognize this trend, it would be hasty to deem Vietnam as exploiting China-U.S. decoupling. It would also be hasty to paint Vietnam as blindly doling out subsidies to attract whatever low-level manufacturing foreign chipmakers hope to outsource.
As Hanoi policymakers spend billions of dollars in subsidies to upgrade the country’s economy, they are strategically building foundational supply chains and infrastructure. They hope that these foundational investments will facilitate Vietnam’s rise to higher value chipmaking and beyond. Just as Vietnam comes into its unique role in China-U.S. relations, the country’s policymakers are also discerning the niche it will fill in the global semiconductor industry.
Bouncing Back
Vietnam’s chip industry dates to 1979, when the government established the Vietnam Semiconductor Z181 Factory. Spun off from a physics lab of Vietnam’s Military Technical Institute, this state-owned facility produced two product lines: 1) chip components like transistors, diodes, and sensors; and 2) equipment to manufacture semiconductor materials.
Though relatively behind in its technological capabilities, the Z181 Factory was a microcosm of the Cold War semiconductor race between the Soviet Union and the United States, best recounted in Chris Miller’s book “Chip War.” Its raison d’être was in part to provide equipment and components to Soviet facilities in Czechoslovakia and Poland between 1979 and 1989. Just as the Cold War led to Z181’s rise, however, it also spelled the factory’s fall. The collapse of the Soviet Union and American economic sanctions cut off Z181’s key customers, ending Vietnam’s first foray into the semiconductor industry by the early 1990s.
After a two decade gap, Vietnam stepped back into the global chip industry, with FPT Semiconductor providing VLSI services in 2014 and the Viettel IC Design Center opening in 2017. These two firms, however, only conduct design and production work for a limited set of telecommunications and medical device use-cases, and no combination of purely Vietnamese groups is yet capable of conceiving and producing a finished chip.
To read the rest of this article, check out The Diplomat.