From Tennis Shoes to Tech: Vietnam’s High-End Semiconductor Ambitions

Vietnam has emerged as a key low-cost electronics manufacturing hub, leveraging its proximity to China, competitive labor costs, and youthful population. The country has a population of roughly 100 million, with 64% under the age of 35, a true advantage in an aging Asia-Pacific. According to Vietnam’s General Statistics Office, manufacturing wages average $300–350 per month, about half of China’s.

Electronics manufacturing drives over 35% of Vietnam’s exports, with global brands increasingly choosing the country for assembly and final production. Yet, 50–70% of output remains low-end assembly, exposing the sector to margin pressures as wages rise.

Moving into Semiconductors

Vietnam’s government is working to secure a larger share of the global semiconductor market. In 2022, it exported about $600 million in packaged and tested semiconductors, almost entirely from facilities operated by foreign companies. Official projections value the industry at $20–$30 billion by 2030.

There is currently no domestic chip fabrication. Activity is limited to packaging, assembly, and testing at the labor-intensive end of the value chain. These operations are handled by foreign firms, including Intel, which runs a $1.5 billion plant in Ho Chi Minh City, and Amkor, which operates a $1.6 billion facility in Bac Ninh province.

Two domestic companies, FPT and Viettel, are building chip design capabilities with long-term ambitions for fabrication. The government has approved about $500 million to build the country’s first domestically backed chip fabrication plant and plans to spend roughly $690 million in public funds by 2030 to support design, packaging, testing, and workforce training. Although small compared to the multi-billion-dollar commitments of global competitors, these steps mark the early coordinated effort to build a domestic semiconductor ecosystem.

Challenges to Moving up the Value Chain

Talent Shortage

A critical barrier to Vietnam’s semiconductor ambitions is a shortage of specialized talent. While 52% of graduates are in STEM fields, the country faces a tenfold shortfall of integrated circuit engineers for large-scale operations. Thirty-five universities now offer semiconductor engineering courses, targeting 1,000 students in 2024, up 30% from 2023. However, training takes four to five years, and without clear job pipelines, graduates may shift sectors, creating a “chicken and egg” dilemma: investors hesitate without talent, but talent won’t grow without industry demand.

Funding Gap vs. Global Competition

The global race for semiconductor manufacturing is a pay-to-play environment, and other nations are committing vastly larger sums. The United States has allocated $52.7 billion under the CHIPS Act of 2022. China has invested more than $100 billion over the past decade. The European Union has committed €43 billion, Japan and India each over $7 billion, and South Korea around $50 billion through its K-semiconductor initiative.

Even within ASEAN, competition is strong. Malaysia is one of the world’s top semiconductor packaging hubs, accounting for about 13% of global capacity. Singapore has a deep talent pool and hosts fabs from GlobalFoundries and Micron. Thailand is moving aggressively into automotive chip packaging. Vietnam’s own planned public funding, roughly $500 million for a pilot fabrication plant and $690 million through 2030 for broader industry support, is modest by comparison and underscores the scale of the gap.

Infrastructure Constraints

Semiconductor fabrication requires stable electricity and advanced water treatment, far beyond the requirements of standard electronics manufacturing. Vietnam’s grid already struggles to keep up with industrial demand. In 2023, prolonged power shortages in the north disrupted production at multiple factories. Without major upgrades to power, water, and industrial park infrastructure, high-end semiconductor operations will face significant bottlenecks.

Technology Transfer Limits

Shifting to fabrication demands advanced process technology, controlled by a few nations and firms like TSMC, Samsung, and ASML. U.S., Japanese, and Taiwanese export controls and strict IP protection may restrict Vietnam’s access to cutting-edge know-how. Without these capabilities, the country risks being locked into lower-value segments of the supply chain, even if capital and talent gaps are narrowed.

Structural Dependence & Geopolitical Headwinds

Vietnam’s approach has so far largely relied on attracting foreign companies to invest and take on the risk of building its domestic industry. While this limits direct fiscal exposure, it leaves the country dependent on outside capital, technology transfer, and the priorities of foreign investors. High-end semiconductor manufacturing is far more competitive than the low-value assembly work Vietnam gained through the “China +1” shift. Powerful nations are chasing the same jobs with heavy subsidies, and the geopolitics are tense and complex.