Nguyen Thien Nghia, deputy director of the Authority of Information and Communications Technology (ICT) Industry under the Ministry of Information and Communications (MIC), cited examples of two Vietnamese smartphone manufacturers.

One of the manufacturers has strength in software and tried to develop hardware manufacturing as well. But it failed. The second has powerful financial capability, but left the market after two years of trying to make smartphones.

The two manufacturers told Nghia they were confident in product quality when compared with smartphone companies in Vietnam, including Samsung and LG. However, they could not compete with the foreign giants because the latter make products in large quantities to serve the global market, while the market for the two Vietnamese manufacturers was too small. 

Nghia said that most large mobile phone manufacturers sell their products to the global market and do not only target domestic markets. Vietnam still cannot compete with them on a global scale, but can grow by developing niche markets.

To develop a semiconductor design industry, the government is offering investment incentives, which are believed to be the largest incentives among technology fields. However, Vietnam still has not developed the industry because of the lack of a long-term strategy.

Nghia once cited statistics as saying that the ICT industry has maintained a 7-9 percent growth rate in the last 10 years. In 2021, the industry had revenue of $150 billion. The growth rate is high, but the problem is that Vietnam doesn’t make a big contribution to the value chain.

Over 90 percent of personal software in Vietnam is from foreign companies and 60-70 percent of specialized software also belongs to international brands. Meanwhile, 99 percent of personal hardware is not from Vietnamese companies.

In such conditions, macro-factors in Vietnam pose a lot of problems. For example, the population is aging rapidly and the advantages in population and labor force will no longer exist.

In 5-10 years, the factors considered Vietnam’s competitive edges that have helped attract foreign investors will disappear. Vietnam needs to be self-reliant in many industries, including the semiconductor chip industry.

Nguyen Anh Thi, head of the HCM City Hi-tech Park Management Board, shared the same view. The government has many policies on economic self-reliance, but Thi believes that Vietnam won’t be able to be self-reliant if it cannot be self-reliant in technology. And that means being self-reliant in IC (integrated circuit).

Vietnam cannot join the entire ecosystem, but it needs to participate actively and step by step hold an important role that allows it to be decisive in negotiations.

At HCM City Hi-tech Park, Intel’s chip manufacturing factory makes up 70 percent of the global packaged chip output of the manufacturer, which shows the importance of the factory in Vietnam. 

Thi said that the capability in semiconductor IC in Vietnam remains weak with the lack of Vietnamese enterprises in the ecosystem.

Macro strategies and high-quality manpower 

Buu Bai Cuong from the Authority of ICT Industry said there are challenges and opportunities to develop semiconductor IC in Vietnam.

Southeast Asian countries like Malaysia, Indonesia and Singapore have policies on joining the semiconductor IC industry, so Vietnam needs to have similar macro policies to create a foundation for this industry.

Vietnam has 5,000 semiconductor IC engineers, but it lacks a high-quality labor force. There are almost no Vietnamese enterprise manufacturing chips.

There are many favorable conditions to develop the industry. For example, Vietnam’s population is 100 million, which means a large market. Meanwhile, the government applies policies to speed up digital transformation, helping many technologies to develop. The presence of foreign companies in Vietnam also helps the ecosystem.

In addition, Vietnam has a suitable geographical position and good partnership with Japan and South Korea. The trend of the US attaching more importance to the Southeast Asian market in the supply chain also brings great opportunities.

Regarding challenges, Cuong cited the lack of a chip industry development strategy at the national level; the lack of connection of businesses and experts, in Vietnam and overseas; the lack of a high-quality workforce, and stiff competition with regional countries. 

The Vietnamese market relies 100 percent on foreign made chips.

Regarding solutions, enterprises proposed building an autonomous semiconductor industry in order to become self-reliant in digital transformation and to ensure national security. As Vietnam lacks a production ecosystem, it can choose to design IC.

Hai Dang