Ho Chi Minh, Vietnam – On a sunny California afternoon in late September, Vietnam’s Prime Minister Pham Minh Chinh took a tour of Silicon Valley, cosying as much as officers at semiconductor corporations Synopsys and Nvidia.
Somewhat over a month earlier in Hanoi, Pham tasked 4 authorities ministries with growing the variety of Vietnamese engineers able to working in semiconductor manufacturing by the tens of hundreds.
Authorities efforts to make Vietnam a sexy possibility for chip funding have continued within the new yr.
Minister of Science and Know-how Huynh Thanh Dat final month informed native media that authorities had put tax incentives in place for high-value-added merchandise akin to semiconductors.
Dat mentioned the nation wished to welcome a “wave” of funding by collaborating with different ministries and tech firms to spice up analysis and draw expertise to the semiconductor sector.
Vietnam has set its sights on turning into a main participant within the world provide chain for semiconductors – the wafer-thin built-in circuits important to fashionable expertise.
As Hanoi and a bevvy of countries align on the necessity to de-risk from China amid intensifying geopolitical tensions, the Southeast Asian nation seems to have momentum on its aspect in its bid to rival the dominance of Taiwan and South Korea.
But Vietnam faces obstacles, too, together with a restricted pool of expert labour and vitality insecurity within the nation’s tech manufacturing hub within the north.
The worldwide push to diversify semiconductor provide chains is in keeping with Hanoi’s improvement goals, mentioned Le Hong Hiep, a senior fellow on the Singapore-based ISEAS-Yusof Ishak Institute who previously labored as an official at Vietnam’s Ministry of Overseas Affairs.
“The semiconductor trade is seen as a vital trade that may assist Vietnam rework its economic system and switch Vietnam right into a developed and high-income economic system by 2045,” Hiep informed Al Jazeera.
“When it comes to timing and the strategic setting, it’s beneficial for Vietnam to develop the trade now.”
On the floor, Vietnam’s chip ambitions appear to be flourishing amid an inflow of international capital.
Throughout a go to to Hanoi in early December, Nvidia co-founder and CEO Jensen Huang known as Vietnam the chip large’s “second residence”, pledged to broaden partnerships with native corporations and arrange a base within the nation, in line with native media studies.
Nvidia, whose market capitalisation final week surpassed $2 trillion, says it has invested $12m within the nation up to now.
A Nvidia spokesperson declined to touch upon Nvidia’s future operations in Vietnam when contacted by Al Jazeera.
Vietnam has about 5,000 engineers educated in semiconductors however will want as many as 20,000 within the subsequent 5 years, in line with the US-ASEAN Enterprise Council.
“When firms take a look at Vietnam, it seems actually good on paper however once they truly should undergo and look to see if there’s ample electrical energy, what’s the infrastructure and most significantly, what are the human sources like… I don’t suppose Vietnam goes to be the producer that it thinks it’s,” Zachary Abuza, a professor on the Nationwide Warfare Faculty in Washington, DC who focuses on Southeast Asia, informed Al Jazeera.
Vietnamese authorities are conscious of workforce shortcomings and are main a push to coach extra engineers, mentioned Nguyen Thanh Yen, a principal engineer on the Hanoi department of the Korean chip design firm CoAsia SEMI.
“The federal government is now aggressively planning devoted programmes to spice up up the variety of semiconductor engineers,” Yen informed Al Jazeera.
Semiconductors had been a centrepiece of the historic improve in relations between Vietnam and the US introduced in September, when the 2 nations agreed to a complete strategic partnership – the very best tier in Hanoi’s diplomatic hierarchy.
“We’re deepening our cooperation on important and rising applied sciences, notably round constructing a extra resilient semiconductor provide chain,” US President Joe Biden mentioned throughout a September 9 joint press convention with Nguyen Phu Trong, the overall secretary of the Communist Occasion of Vietnam.
US chip firms seem like aligning with Washington’s agenda.
Arizona-based Amkor began operations at a $1.6bn chip manufacturing unit in northern Vietnam this October, whereas Delaware-headquartered Marvell introduced in Might that it will set up a semiconductor design centre within the nation.
South Korean corporations are additionally becoming a member of the frenzy. Samsung, Vietnam’s largest investor, introduced in August 2022 that it will make investments $3.3bn to fabricate semiconductor parts within the nation.
Hana Micron Vina, which specialises in chip packaging and reminiscence merchandise, is constructing a second manufacturing unit in Vietnam and plans to take a position $1bn within the nation by 2025, in line with a Nikkei Asia report.
Chip corporations are “all competing for this very small, tight labour market,” Abuza mentioned. “[Vietnam] goes to have to extend their charge of engineers by like 5 instances yearly to do that.”
Others akin to Yen are optimistic about Vietnam’s capacity to rise to the problem.
He mentioned the nation excels in math and science and 20 technical universities are beginning semiconductor coaching programmes with the objective of getting 50,000 engineers added to the workforce by 2030.
“Vietnam has the benefit of younger and hungry human sources,” Yen mentioned. “The fields that assist them make cash most simply are usually within the technical sectors. Semiconductors are getting scorching now.”
Assist can also be coming from exterior.
Throughout his go to to Vietnam, Biden introduced $2m in seed funding for coaching in Vietnam’s semiconductor trade.
Europe could possibly be subsequent to get entangled, mentioned Bruno Sivanandan, the co-chairman of the Digital Sector Committee on the European Chamber of Commerce Vietnam.
“There could also be partnerships with academies in Europe to help the schooling of Vietnamese staff,” Sivanandan informed Al Jazeera. “Vietnam has such an enormous potential that’s not but realised, so the large gamers need to Vietnam.”
Nonetheless, Vietnam might not have the posh of time with regional challengers vying for funding.
Hiep at ISEAS mentioned Malaysia and Singapore had been formidable rivals and Indonesia and Thailand had been additionally pursuing the sector.
“All people is in search of alternatives to determine their presence within the world chip provide chain,” Hiep mentioned. “It’s a very, very aggressive Trade.”
Vitality insecurity can also be a problem.
Throughout Vietnam’s hottest summer time thus far final yr, northern locales skilled intermittent blackouts. In early June, the climate was so sweltering throughout a Hanoi energy outage that some households sought refuge in a mountainous cave close to the town centre.
For a number of weeks, factories in industrial parks in northern Vietnam went darkish for hours at a time throughout the afternoons.
“They needed to cease operations as a result of there was no vitality in the course of the day for about 4 or 5 hours,” a Ho Chi Minh Metropolis-based particular person working within the vitality sector informed Al Jazeera, asking for his title to be withheld as he had not been cleared by his firm to debate the subject.
“Samsung and different Korean factories – they had been in an enormous disaster as a result of they needed to cease their factories fully due to the shortage of electrical energy.”
After the outages, authorities launched an investigation into EVN, the nation’s state-run electrical energy supplier. Officers finally disciplined 161 EVN personnel over the ability shortages.
Northern Vietnam is closely depending on hydropower dams, which may dry up throughout the hottest months of the yr when demand is at its highest. Infrastructure is outdated and the nation “lacks the grid capability and the ability sources to take care of the issue”, the vitality sector worker mentioned.
“We must always have invested within the energy transmission and energy sources within the North of Vietnam a few years in the past however EVN, they fell behind,” he mentioned.
“Within the north of Vietnam, [factories] will face an enormous downside in relation to vitality safety.”
Vitality can also be a priority for European funding.
Below the phrases of the European Union’s commerce take care of Vietnam, European firms doing enterprise with the nation should abide by more and more stringent rules on carbon emissions, which might pose issues so long as Vietnam depends closely on coal.
“To do enterprise with Europe, it’s essential to fulfil these necessities on carbon emissions,” Sivanandan mentioned. “If we apply this to the semiconductor trade, that is going to be a barrier.”
Abuza mentioned there’s a appreciable hole between Vietnam’s potential and the fact on the bottom.
“These chip factories and server farms and all of the high-tech stuff Vietnam desires to do actually depends on very regular electrical energy they usually simply don’t have it,” he mentioned. “Vietnam has wonderful potential for traders however there’s a lot they’ve bother resolving.”