Vietnam's semiconductor industry may have never received as much attention from the world as it does now. According to Bloomberg, on December 11, local time, Huang Renxun discussed a cooperation agreement in the semiconductor field with Vietnamese technology companies and the government.The former stated that it will invest US$250 million in the future to build a chip center in Vietnam.
Huang Renxun's trip to Southeast Asia can be described as "rain and dew". During his visit to Singapore, Huang Renxun revealed that NVIDIA is working with the country's government to create a large language model trained in 11 languages; in Malaysia, Huang Renxun said that he would build an artificial intelligence data center with local companies.
In fact, compared to Singapore and Malaysia, Vietnam's semiconductor industry is weaker, but it may take over Nvidia's only R&D center in Southeast Asia in the future.
However, even with Nvidia's help, it may be difficult for Vietnam to occupy a core position in the global semiconductor industry with a highly defined division of labor.
Is Vietnam already a “second home”?
Nvidia’s investment in Vietnam is not an isolated incident.
In September this year, during Biden's visit, the two governments announced a number of semiconductor and rare earth mineral agreements. At almost the same time, EDA giant Synopsys announced that it would cooperate with Saigon High-Tech Park to open a semiconductor design and incubation center; chip design manufacturer Marvell (Marvell Electronics) also announced that it would upgrade its subsidiary in Ho Chi Minh City to a "global R&D center."
The addition of EDA and Marvell has allowed the Vietnamese government to see the possibility of transforming the semiconductor industry chain to the design end. Over the past two decades,The country's semiconductor industry has been stagnant in the packaging and testing process for a long time. It has neither wafer foundries nor high-level design companies.
According to statistics from the Semiconductor Industry Association (SIA), in the current global semiconductor industry, packaging accounts for only 6% of the total value of chips, far lower than design (53%) and foundry (24%).
But just when the Vietnamese government was preparing to express its ambitions, Intel poured cold water on it.
In early November, Intel decided to suspend its factory expansion plan in Vietnam. According to previous plans, Intel will invest an additional US$1 billion in capacity expansion of the Ho Chi Minh City packaging and testing factory. If the plan goes well, the factory will become Intel's largest packaging and testing factory in the world after capacity expansion.
According to Reuters, citing people familiar with the matter, the reason for abandoning the investment was Intel executives' concerns about "stable power supply and heavy bureaucracy."
Intel's statement aroused the vigilance of the Vietnamese government, which announced that it would soon introduce greater tax relief and land leasing policies. After all, after Intel signed a wafer foundry cooperation agreement with India in the early years, it turned around and decided to locate the new factory in Dalian, China. This led to the termination of inspections by companies such as STMicroelectronics. The lesson is still vivid in our minds.
Huang Renxun’s statement this time allowed the Vietnamese government to temporarily put aside its concerns.
According to reports from the Vietnam News Agency, at a semiconductor and artificial intelligence conference organized by the Ministry of Planning and Investment of Vietnam,Huang Renxun said that Nvidia hopes to build Vietnam into the company’s “second home” and will establish a legal entity in Vietnam to improve local artificial intelligence infrastructure and personnel skills.
Although Leader Huang has high expectations for Vietnam, Nvidia's development in Vietnam may be more difficult than Intel's.
As a Fabless manufacturer (fabless), Nvidia does not involve foundry, packaging and testing. Its US$250 million investment in the "Chip Center" can basically only serve as a research and development function.
But the problem is that there is a serious shortage of chip engineers in Vietnam.
VuTUThanh, head of the Vietnam Office of the U.S.-ASEAN Business Council, once said in an interview,Currently, Vietnam has only 5,000-6,000 trained chip engineers nationwide, and Vietnam's demand for chip engineers in the next five years will be around 50,000.
Business Insider has previously reported that there are a large number of key job vacancies in Vietnam's semiconductor industry. If investment in Vietnam's semiconductor industry surges in the next few years, this mismatch between talent and industry development may become increasingly serious.
A senior semiconductor practitioner told Huxiu,"Whether it is wafer foundry or chip design, both have a strong Know-How attribute. A qualified chip engineer must undergo at least 5-8 years of training after graduation to fully master professional skills."
Vietnam currently does not have a wafer foundry, and advanced chip design is still in its infancy. More importantly, the only university in the country that can be responsible for microelectronics professional training is Hanoi University of Science and Technology.
Will it be a threat to China?
In Asia, the transfer of labor-intensive industries to Southeast Asia is an inevitable trend. However, considering the high threshold of the semiconductor industry, it may be difficult to achieve substantial progress in the short term.
A wafer foundry executive told Huxiu that although some foreign-funded companies have chosen to move their R&D centers from China to Vietnam (such as Marvell) due to geopolitical influences, the talent gap issue on the table will not allow this behavior to evolve into a trend; in terms of wafer foundry, even the investment in 12-inch wafer production lines with mature processes generally exceeds 10 billion. Considering Vietnam's relatively backward infrastructure construction level, foreign investment is unlikely to take this risk.
Especially in terms of upstream and downstream industry collaboration, Vietnam does not have the conditions for wafer foundry. "Take materials as an example. In wafer production, in addition to the core single crystal silicon material, more than 200 kinds of auxiliary materials including various chemical reagents, precious metals, and special gases are also needed. Except for a few types such as hydrogen bromide that rely on imports, most have domestic alternatives in China, but Vietnam has almost no industrial chain in this regard."
However, the executive said,Considering that so many foreign semiconductor giants will extend an olive branch to Vietnam in the second half of this year, it is also a warning signal for some domestic practitioners.
Vietnam's core advantage lies in its large and cheap labor force with basic education, which is exactly what is needed in the chip packaging and testing process.
"I don't quite understand why Intel's packaging and testing plants have high requirements for electricity. In fact, the packaging and testing process can solve the power outage problem through flexible production." The wafer factory executive pointed out that unlike the wafer foundry, a power outage may cause the entire batch of products to be scrapped, the packaging and testing plant's infrastructure requirements for backward areas are not high, and the technical threshold is relatively low.
In terms of labor costs, the wage level in Vietnam's packaging and testing factories is only about one-third of that in China.
In fact, although Intel has suspended investment in Vietnam's packaging and testing factories, the veteran packaging and testing giant Amkor has already chosen to bet heavily on Vietnam. Previously, the company spent 16 million yuan to establish its largest packaging and testing factory in Bac Ninh Province, Vietnam, and was directly positioned in advanced system-level packaging.
Industry insiders pointed out that considering the current hot demand for NVIDIA's A100/H100 GPU, TSMC's CoWoS advanced packaging production capacity is actually in short supply. If NVIDIA continues to place additional orders in the future, it cannot be ruled out that some advanced packaging production capacity will be transferred to Amkor's factories.
For China, the packaging and testing industry provides a large number of jobs and economic benefits. According to statistics from the China Semiconductor Industry Association, the number of employees in the domestic semiconductor packaging and testing industry will reach 140,000 in 2022, and the market size will reach 298.5 billion yuan.
Considering that the packaging and testing industry is a typical labor-intensive industry, if foreign investment continues to invest in Vietnam, it may have a certain impact on the domestic packaging and testing end.
But in any case, at least in the foreseeable 5-10 years, Vietnam has not shown the potential to transition from the packaging and testing end to the design end and manufacturing end in any dimension. Therefore, the expression about Leader Huang's "second hometown" may be more based on some kind of political statement.