For a lot of the previous three a long time, Vietnam’s financial success has rested on turning into one of many world’s value-for-money manufacturing locations. Vietnam acknowledges that corporations and nations world wide are looking for to ameliorate their China threat by having one other nation (the “plus one”) as a supply of sources (e.g., important minerals) and manufacturing.
Now, recent off its World Financial institution reclassification as an upper-middle-income nation, Hanoi has a much more bold goal: to change into an indispensable participant within the bodily layers underpinning synthetic intelligence (AI).
Semiconductors sit on the heart of that ambition. Over the previous two years, Vietnam has unveiled a collection of initiatives that collectively quantity to one in all Southeast Asia’s most bold semiconductor methods. The federal government plans to practice 50,000 semiconductor engineers by 2030, launch a $100 million enterprise capital fund impressed by Israel’s Yozma program, dramatically improve public spending on science and know-how, appeal to further international funding from international know-how leaders, and safe home provides of uncommon earth minerals which are important inputs into chip manufacturing.
Taken collectively, these initiatives characterize one thing extra vital than Vietnam’s previous method to industrial coverage. Hanoi is utilizing financial statecraft to place itself inside international worth chains as a way of fueling continued financial progress and sovereignty.
The ambition is obvious, however whether or not these insurance policies ship will depend upon whether or not they genuinely construct technological capabilities. Traditionally, the financially strapped state invested too little in science and know-how and a “two-speed” economic system continued, the place international corporations working in Vietnam didn’t successfully translate into upskilling Vietnam’s corporations and workforce. Can this push be totally different?
From Meeting and Testing Hub to Semiconductor Design and Manufacturing Technique
Vietnam’s authorities is now hustling to rework its meeting and testing, and low-cost benefits, into one thing extra bold and, hopefully, sturdy.
Determination No. 1018/QD-TTg, adopted in September 2024, lays out Vietnam’s nationwide semiconductor growth technique by 2050. The technique is captured within the slogan “C = SET +1.”
The method envisions Vietnam’s chip {industry} (C) on account of constructing specialization (S), electronics (E), and expertise (T). The “+1” displays Vietnam’s ambition to change into the popular various vacation spot for semiconductor funding as corporations search to diversify provide chains past China.
On the core of this method is Vietnam’s ambition to transfer past its outsourced semiconductor meeting and testing (OSAT) providing. Vietnam goals to change into an more and more subtle participant throughout semiconductor design, packaging, testing, and ultimately manufacturing.
The roadmap is bold in its amount indicators, however much less concrete across the high quality.
Throughout the first part (2024-2030), Vietnam plans to draw a minimum of 100 chip design corporations, set up one semiconductor fabrication facility, and develop 10 packaging and testing vegetation. By 2040, these targets rise to 200 design corporations, two fabrication vegetation, and 15 packaging and testing services. By 2050, the federal government hopes Vietnam will host 300 design corporations, three fabrication vegetation, 20 OSAT services, and change into an internationally aggressive heart for semiconductor analysis and manufacturing.
To allow this scale of exercise, the technique emphasizes coaching giant volumes of Vietnamese staff. The federal government has dedicated to coach 50,000 semiconductor engineers by 2030. Universities are quickly increasing semiconductor applications whereas corporations are growing partnerships with instructional establishments to develop specialised expertise.
The technique is correct to deal with expertise and expertise. Taiwan’s semiconductor success, for instance, rested as a lot on a long time of funding in engineering schooling and technical know-how as on the sophistication of TSMC’s fabrication vegetation themselves.
Vietnam seems to acknowledge this lesson. The problem can be in delivering on these government-industry-university collaborations to ship coaching applications on the high quality and scale wanted.
A Step-change in S&T Funding
The Vietnamese authorities’s science and know-how spending has traditionally underperformed that of different nations, together with China, compared to related moments of their upgrading trajectory. For example, fairly than the two p.c China was allocating to S&T within the mid 2010s, solely 0.7 p.c of the Vietnamese state funds was spent on S&T.
That seems to be altering. The 50,000 chip engineers coaching program has allotted a $1 billion funds. Final month, Vietnam introduced plans to ascertain a $100 million enterprise capital fund.
Beforehand, the constructing of Vietnam’s VC market went “across the state,” fairly than benefitting from authorities fund of funds or co-investment. Startup initiatives centered on comparatively cheap applications resembling Techfest and Vietnam Silicon Valley, not substantial public funding.
Extra just lately, nevertheless, Hanoi has introduced plans to extend science and know-how spending to between 3 and 4 p.c of the state funds, alongside main infrastructure tasks and considerably bigger investments in innovation.
The problem, nevertheless, is whether or not the spending, and particularly the enterprise capital initiative, are spent successfully.
The $100 million fund is impressed by Israel’s Yozma program, which famously fostered Israel’s nascent VC {industry} within the early Nineteen Nineties. Yozma was not merely a authorities funding fund allocating to tasks and startups. It was designed to catalyze a whole enterprise capital {industry} by partnering with personal fund managers and requiring substantial international co-investment. These worldwide buyers introduced greater than capital. They launched international networks, funding experience, and an exterior sign of high quality that helped combine Israeli VCs (and startups) additional into worldwide markets, particularly the USA.
The important thing to Yozma’s success lay in institution-building. From the start, Yozma was meant to change into out of date; the design was to denationalise in 5 years, with the fund serving as a one-time catalyst for constructing a cohort of early-stage Israeli VCs. It delivered: by 2000, Israel’s VC market was second in absolute measurement to solely the USA. Many nations, together with New Zealand, Singapore and Taiwan, have tailored native variations of Yozma.
Vietnam’s proposed adaptation stays much less clear.
The Ministry of Science and Expertise stated it can “regularly mobilize personal capital, accounting 30 to 40 p.c of the full capital, alongside the event of separate funds for various know-how sectors.” The fund might want to report back to the Nationwide Meeting and speaks of “market-based recruitment and compensation” that may permit autonomy to the “fund’s funding council.” This sounds extra like a authorities VC fund than the Yozma mannequin that catapulted Israel’s VC {industry} from a handful of small funds to a thriving market.
Worldwide expertise, together with proof mentioned in my e-book “The Enterprise Capital State” and Josh Lerner’s “Boulevard of Damaged Desires,” reveals that authorities enterprise funds usually wrestle when political aims exchange business self-discipline.
Equally necessary, Vietnam immediately differs basically from Israel within the early Nineteen Nineties. In contrast to Israel on the launch of Yozma, Vietnam already possesses a longtime enterprise capital ecosystem. Companies resembling Mekong Capital, VinaCapital, Dragon Capital, IDG Ventures Vietnam, and quite a few worldwide buyers have operated within the nation for many years.
This raises necessary coverage questions. Is the target of Vietnam’s Yozma-inspired VC fund to strengthen present enterprise capital capabilities, to crowd in further worldwide institutional buyers, or just to extend the quantity of capital? The reply issues as a result of totally different designs are wanted.
The Problem of Amount Versus High quality
Vietnam’s semiconductor technique is spectacular in its ambition. But one notable function of the roadmap is that many targets measure the variety of corporations fairly than technological functionality. Establishing 100 design corporations says comparatively little about how Vietnam intends to compete alongside the semiconductor frontier.
The corporations will deal with mature chips, which suggests specializing in the 32-nanometer chips utilized in automotive, industrial tools, and telecoms. It isn’t striving to chase the superior chips, now at 5 nm or much less, that Taiwan dominates.
The intention is to leverage present design exercise in Vietnam. Japanese corporations like Panasonic and Toshiba, and Korean giants like LG and Samsung Electronics, are already current. Intel has, famously, invested greater than $4 billion in its facility exterior of Ho Chi Minh Metropolis since 2007.
Vietnam’s personal champions, FPT Semiconductor and Viettel, are increasing their capabilities. They’re performing some if it in partnership with international leaders in AI, together with Nvidia. FPT Company, for instance, is investing $200 million in constructing an AI manufacturing unit that includes tremendous computer systems based mostly on Nvidia’s H100 Tensor Core graphic processing unit (GPU) know-how.
That is promising, although questions stay about whether or not the “two-speed” economic system will converge, and Vietnam’s nationwide capabilities advance. Figuring out that requires measuring greater than the variety of collaborating corporations.
China’s Made in China 2025 technique, for instance, established express aims round international market share and technological self-sufficiency. Whether or not or not these targets had been totally achieved, they mirrored an understanding that industrial functionality finally depends upon efficiency fairly than participation.
Delivering on Vietnam’s Chip Technique
Vietnam enters this new part with vital momentum. It was one of many world’s fastest-growing economies in 2025, extending greater than 30 years of sustained financial progress for the reason that doi moi reforms.
The federal government’s semiconductor technique demonstrates rising capabilities and willingness to speculate huge in upgrading capabilities. The route of journey is due to this fact constructive.
The central problem for Vietnam is now one in all guaranteeing absorptive capability: that international funding generates home technological studying; that engineering graduates develop world-class capabilities fairly than merely growing headcount; that authorities enterprise capital funding expands its internationally related buyers fairly than serves as a state financing car which will crowd out market-based capital.
Competing in AI chips is among the defining options of twenty first century geopolitics. Vietnam has appropriately acknowledged that this presents an historic alternative. The query now could be whether or not its financial statecraft may also help foster actually aggressive chip design or manufacturing capabilities.
