Guest Article by Léane Noirot

Vietnam is pushing to move up the semiconductor value chain from assembly into chip design and fabrication, backed by national strategy and rising foreign investment. Its success will depend on managing infrastructure, capital, and geopolitical pressures amid intensifying US–China competition.

Vietnam has entered a decisive phase in its industrial transformation. Long known as a manufacturing hub for electronics assembly, the country is now attempting a far more ambitious leap: moving up the global semiconductor value chain. The recent groundbreaking of its first integrated chip fabrication facility, combined with a comprehensive national strategy and aggressive talent development goals, signals Hanoi’s intent to reposition the country as a strategic node in the global technology economy.

Yet Vietnam’s semiconductor ambitions unfold within a complex geopolitical landscape defined by intensifying technological rivalry between the United States and China, supply chain fragmentation, and fierce regional competition. Whether Vietnam can successfully transition from an assembly hub to a meaningful player in design and fabrication will depend not only on domestic reforms but also on how effectively it navigates these external pressures.

This article examines Vietnam’s semiconductor strategy through three lenses: its industrial policy and structural advantages, its positioning within global supply chains amid US–China competition, and the constraints that could shape its trajectory over the coming decade.

From Assembly Hub to Value Chain Upgrading

Modern electronics depend on semiconductors, which serve as the foundational components of everything from smartphones to advanced computing systems. The global semiconductor market was valued at roughly $527 billion in 2023 and is projected to exceed $1 trillion by 2030, driven largely by demand for artificial intelligence, electric vehicles, and cloud computing infrastructure.

The semiconductor value chain can be broadly divided into three stages: design, fabrication, and assembly, testing, and packaging. The highest value is concentrated in design and fabrication, which together capture more than 70 percent of total industry value, while assembly remains comparatively low value-added.

Historically, Vietnam’s role has been concentrated at the lower end of this chain. The country hosts major assembly and testing operations for multinational firms, including Intel, Amkor, and Hana Micron. Intel alone has invested more than $1.5 billion in its Ho Chi Minh City assembly and testing facility, one of its largest globally.

Vietnam’s new strategy seeks to address this imbalance. At Hoa Lac Hi-Tech Park near Hanoi, state-owned technology conglomerate Viettel has begun developing the country’s first indigenous semiconductor fabrication facility. The plant aims to achieve end-to-end production capabilities, with trial operations expected by 2027 and full operation around 2030. Initial production targets focus on 32-nanometer chips, a significant step forward despite being far behind the 2- to 3-nanometer frontier.

Industrial Policy and the National Semiconductor Strategy

Vietnam’s ambitions are now institutionalized through its National Semiconductor Strategy, which outlines development goals through 2030 and a longer-term vision to 2050. The strategy includes plans to establish at least one domestic fabrication facility, develop 100 chip design firms, and expand advanced packaging capacity.

Government incentives include corporate tax reductions to as low as 10 percent for up to 15 years for high-tech projects, alongside subsidies covering up to 50 percent of initial R&D investment costs in certain cases.

A key pillar of the strategy is human capital development. Vietnam aims to train 50,000 semiconductor engineers by 2030, building on a workforce of roughly 700,000 engineers in electronics and IT fields. Currently, around 30 percent of university students are enrolled in STEM programs, with a target of 35 percent by the end of the decade.

Structural Advantages: Manufacturing Depth and Export Orientation

Vietnam enters the semiconductor race with several structural advantages. Over the past two decades, export-led growth driven by foreign direct investment has transformed the country into a major electronics manufacturing base.

Electronics exports reached approximately $165 billion in 2023, accounting for roughly 41 percent of total exports, one of the highest concentrations in Southeast Asia. This deep integration into global supply chains provides a strong foundation for upgrading into higher-value activities.

Foreign direct investment continues to play a critical role. Vietnam attracted around $26 billion in manufacturing FDI in 2024, much of it directed toward high-tech sectors. Major global firms have expanded operations in industrial hubs such as Bac Ninh, Da Nang, and Ho Chi Minh City, reinforcing Vietnam’s role as a regional manufacturing powerhouse.

The “China Plus One” Dynamic and Supply Chain Diversification

Vietnam’s semiconductor push is closely linked to broader shifts in global supply chains. As geopolitical tensions reshape manufacturing networks, multinational firms are increasingly adopting a “China Plus One” strategy to diversify production.

Vietnam has emerged as one of the main beneficiaries of this shift. Manufacturing output grew by nearly 7 percent year-on-year in early 2024, supported by new high-tech investments and expanding export demand.

The domestic semiconductor market itself is expected to grow significantly. Estimates suggest the sector could reach around $31 billion by 2027, with annual growth rates exceeding 10 percent, reflecting strong investor confidence and rising domestic demand.

Strategic Positioning Between the United States and China

Vietnam’s semiconductor ambitions unfold against the backdrop of intensifying technological competition between the United States and China. Both countries are investing heavily in domestic semiconductor capabilities, with US public funding through the CHIPS and Science Act exceeding $52 billion, while China has committed more than $150 billion to its domestic semiconductor industry over the past decade.

Vietnam’s foreign policy approach emphasizes maintaining strong economic ties with both powers while avoiding overdependence on either. The country has benefited from supply chain diversification as companies seek alternatives to China, but it must also manage trade tensions and regulatory scrutiny.

Tariff fluctuations and concerns over transshipment have highlighted the delicate balance Vietnam must maintain to preserve its position as a trusted manufacturing partner.

Persistent Constraints and Structural Risks

Despite strong momentum, Vietnam’s semiconductor strategy faces significant obstacles. Infrastructure remains a key constraint, particularly energy supply. Semiconductor fabrication plants require uninterrupted electricity and high-quality infrastructure, yet northern industrial zones have experienced periodic power shortages in recent years.

Another challenge is capital intensity. Building a cutting-edge fabrication facility can cost more than $10 billion, far exceeding the scale of Vietnam’s initial projects. Achieving technological competitiveness will require sustained investment and international partnerships.

Vietnam must also strengthen domestic research and development capacity. Currently, national R&D spending remains below 1 percent of GDP, significantly lower than leading semiconductor economies such as South Korea and Taiwan.

Regional Competition and the Race for Semiconductor Investment

Vietnam is not alone in seeking to capture semiconductor investment. Malaysia’s semiconductor industry accounts for roughly 7 percent of global chip assembly and testing, while Singapore hosts advanced fabrication and design operations.

This regional competition underscores the importance of effective policy implementation. Vietnam’s ability to streamline regulations, improve infrastructure, and sustain investor confidence will determine whether it can differentiate itself within the region.

Conclusion: A Strategic Opportunity with Uncertain Outcomes

Vietnam’s entry into the semiconductor race marks a pivotal moment in its economic development. The country has moved beyond aspirational rhetoric to concrete action, supported by national strategies, legal frameworks, and growing investor interest.

Its ambitions reflect a broader shift in global economic dynamics, as supply chain diversification and geopolitical competition create new opportunities for emerging economies. Vietnam’s ability to leverage its manufacturing base, invest in human capital, and maintain strategic balance between major powers will shape its trajectory.

However, success is far from guaranteed. Structural constraints, technological barriers, and geopolitical uncertainties could limit progress if not carefully managed. The coming decade will therefore be decisive, determining whether Vietnam can transition from a promising alternative manufacturing hub to a credible and strategic player in the global semiconductor landscape.

For policymakers, investors, and analysts alike, Vietnam offers a compelling case study of how emerging economies attempt to climb the technological ladder in an era defined by economic fragmentation and strategic competition. The outcome will not only shape Vietnam’s future but also provide broader lessons for countries seeking to capture greater value in the global technology economy.

Image credits: Photo by Jason Pham on Unsplash

Léane Noirot
Léane is a French student specializing in economics and geopolitics, currently based in France. Her academic interests focus on global supply chains, industrial policy, and the geopolitical dimensions of technological competition, particularly in Asia. She is especially interested in how emerging economies position themselves within shifting economic and strategic landscapes.