Part 3: Vietnam - Fertile ground for innovation

“It is about planting the seed, having the fertile ground to plant it, and making it grow.”

Lynne Gadkowski, Economic Counselor at the US Embassy in Hanoi, could not hide her enthusiasm for the role the US can play in Vietnam’s prospects as an innovative country when she spoke to The Hanoi Times.

“The vision of the Vietnamese Government is solid, with a lot of political will and commitment, which is extremely important. Now, it's a matter of maintaining the momentum, which is a great signal of the beginning of a new chapter. We are focusing on how to sustain the commitment.”

According to Gadkowski, the establishment of a Comprehensive Strategic Partnership has opened new avenues of cooperation between Vietnam and the United States in education, clean energy, and technology, aiming for an innovative and transformative economy while elevating Vietnam's position in the supply chain.

The US is a comprehensive strategic partner in helping Vietnam achieve these goals. Vietnam has made significant strides, she said, and the US stands ready to assist in this process. 

"I want to emphasize the importance of the investment environment in Vietnam. Besides attractive factors such as land, incentives, and skilled labor, the ability to access green technology and clean energy is another critical element," Gadkowski stated.

Recalling her visit to the headquarters of a medical equipment and aerospace manufacturing company in Ho Chi Minh City last October, the US Counselor praised the company's fully enclosed rooftop solar energy system. She emphasized that environmental, social, and governance (ESG) sustainability is a key factor for US and global investors when choosing partners.

Additionally, President Joe Biden's visit and the decision to upgrade the bilateral relations between Vietnam and the US will help promote the digital economy. 

The agreed-upon cooperation includes building a secure, reliable, and secure network, ensuring the security and efficient management of user data, and exploring collaboration in developing areas such as AI and 5G. 

Gadkowski noted that the Covid-19 pandemic has provided a clearer view of the challenges in the supply chain, especially for key commodities such as semiconductors.

In discussing Vietnam's potential in this field, Gadkowski pointed to Amkor Semiconductor's $1.6 billion investment in Bac Ninh province, announced in October. The presence of such large-scale enterprises can enhance Vietnam's contribution to the global supply chain, she noted.

Gadkowski emphasized that the US is working closely with Vietnamese authorities to develop Vietnam's National Semiconductor Strategy, providing key inputs from US research laboratories and experts. "Once completed, the strategy will provide clearer insights into how Vietnam envisions the future of the sector," Gadkowski said.

Meanwhile, Vice President and General Director of Intel Products Vietnam, Kim Huat Ooi, stated that amid the global trend of industrialization and modernization, every country needs semiconductors - a crucial input for electronic devices and components.

Referring to the establishment of a Comprehensive Strategic Partnership between Vietnam and the US during President Biden's visit, which he described as a milestone, the technology company leader reiterated that Vietnam will have more opportunities to attract FDI in the semiconductor investment.

Nearly 20 years ago, Intel became the first high-tech investor in Vietnam. 

"Vietnam has come a long way, and now, not only Intel but also other multinationals are strengthening their presence here," said Ooi.

Echoing Ooi’s view, Wade Cruse, Southeast Asia Operating Partner at Bain & Company (USA), one of the world's  "Big 3" consulting firms along with McKinsey & Company and Boston Consulting Group, observes that Vietnam, along with India, is emerging as a highly prospective destination for semiconductor investments. "In conversations with semiconductor global corporations, they mention that Vietnam is positioned one or two in their investment plans for the next generation," he stated. 

Cruse attributes Vietnam's advantage in attracting semiconductor manufacturing investments to a well-forming ecosystem, talented workforce, technological expertise, and small companies serving the industry.

The Bain & Company representative suggested that the Vietnamese economy is expected to enter the top 3 in Southeast Asia by 2025, surpassing the Philippines and Singapore, with a GDP growth of around 6% per year in the period 2022-2032. Other driving forces include Vietnam's robust foundation for future development, thanks to its large population (around 100 million people) and a high digital penetration rate (approximately 71%). Vietnam's consumer economy is also thriving, with the fastest-growing middle class in Southeast Asia. The digital economy alone is projected to be worth around US$50 billion by 2025, up from  $23 billion today. "Especially, we also recognize the immense potential of the young talents," noted Andrea.

Improving the skills of the workforce is seen as a key challenge for many countries in developing semiconductor markets, and Vietnam is no exception.

Reflecting on her recent visit to Ho Chi Minh City, Counselor Lynne Gadkowski mentioned that the manufacturing facility she visited is experiencing 50% annual growth, but only 15% growth in its workforce, illustrating the challenge of the semiconductor labor market

The US and Vietnam are discussing STEM education collaborations and English language training for mid-level and technical professionals.

In addition, the US Agency for International Development (USAID) is working with the Ministry of Industry and Trade and the Ministry of Planning and Investment on supplementary cooperation policies. "Global companies and investors also highly value a market that ensures compliance with labor standards to prevent human trafficking, child labor abuses... to ensure a 'clean supply' chain," shared Lynne Gadkowski.

Turning to the issue of human resources, Kim Huat Ooi noted that while Vietnam has a large number of university graduates, there is still a shortage of highly skilled personnel such as master's and doctoral degree holders.

Many foreign companies have shared that Vietnam is an attractive destination due to its political and social stability, its young and highly educated workforce, and its strategic location in the center of Asia with direct access to important trade routes and transportation channels.

To further leverage these strengths, Intel's leadership believes that Vietnam should promote existing support programs, especially favorable tax rates, and modernize business support programs.

The simplification of administrative procedures, along with the upgrading of infrastructure and the provision of high-quality professional training, is also a positive aspect in various sectors, including semiconductors. 

"The corporation also hopes that local leaders will empower a one-stop decision-making mechanism to facilitate direct interaction with investors for sustainable development," emphasized Kim Huat Ooi.

Referring to the Vietnamese government's plan to invest VND140 trillion in national power development, Intel's executives also stressed the importance of enhancing the quality of infrastructure, such as transportation and electricity, to increase Vietnam's competitiveness in the semiconductor investment market.

In the highly competitive semiconductor market, many other countries have convenient "one-stop" mechanisms specifically for strategic investments and high-quality investments. "We also hope this is part of the vision of Vietnam's Innovation and Creativity Center," expressed Lynne Gadkowski.

There are currently  40 semiconductor companies operating nationwide, of which 38 are foreign direct investment (FDI) enterprises and two are large domestic companies.

Earlier, during her visit to Vietnam in July, U.S. Treasury Secretary Janet Yellen recognized Vietnam as a critical point in the global semiconductor supply chain.

This is evidenced by significant investment in Vietnam by  US technology companies such as Amkor Technology and Intel Corporation. Intel in particular was highlighted as a key player, with the world's largest chip assembly and testing plant located in Ho Chi Minh City. 

Recently, Vietnam's semiconductor industry ecosystem has seen notable advancements. In May, Marvell Technology (USA) announced plans to set up a microchip design center in Ho Chi Minh City. Just on September 6, the Semiconductor Electronic Design Center (ESC) was inaugurated at the Ho Chi Minh City High-Tech Park (SHTP).

Industry leaders in the U.S. semiconductor sector emphasize that the "back-end" is a promising growth area in Vietnam, according to Reuters. The term "back-end" refers to the stage after the basic components of semiconductor chips have been created through the manufacturing process (front-end), such as wafer slicing, fabrication, testing, and packaging.