Can Vietnam catch Huang's wealth?

Produced by | Tiger Sniff Technology Group

Author | Maruto Mountain

Edit | Wang Yipeng

Header | Visual China

Vietnam's semiconductor industry may never have been in the world's attention as it is today.

According to Bloomberg, on December 11, local time, Huang discussed cooperation agreements in the field of semiconductors with Vietnamese technology companies and the government, and the former said that it would invest $250 million in the future to build a chip center in Vietnam.

Huang's trip to Southeast Asia can be described as "rain and dew". During his visit to Singapore, Huang revealed that Nvidia is working with the government to create a large language model trained in 11 languages, and in Malaysia, Huang said it will work with local companies to build an artificial intelligence data center.

In fact, Vietnam's semiconductor industry is weaker than Singapore and Malaysia, but it may take over NVIDIA's only R&D center in Southeast Asia in the future.

However, even with the help of Nvidia, it may be difficult for Vietnam to occupy a central position in the global semiconductor industry, which has a highly defined division of labor.

Is Vietnam a "second home"?

Nvidia's bet on Vietnam is not an isolated incident.

In September, during Biden's visit, the two governments announced a number of agreements on semiconductors and rare earth minerals. Around the same time, EDA giant Synopsys announced that it would open a semiconductor design and incubation center in partnership with the Saigon Hi-Tech Park, and chip designer Marvell announced that it would upgrade its subsidiary in Ho Chi Minh City to a "global R&D center."

Marvell awards scholarships to students at the inauguration of its R&D center, Photo credit: Vietnam News

The addition of EDA and Marvell has made the Vietnamese government see the possibility of transforming the semiconductor industry chain to the design side, and for more than two decades, the country's semiconductor industry has been stagnant in the packaging and testing process, with neither a wafer foundry nor a high-level design company.

According to the statistics of the Semiconductor Industry Association (SIA), at present, in the global semiconductor industry, the packaging link accounts for only 6% of the total value of chips, far lower than the design (53%) and foundry (24%).

But just as the Vietnamese government was preparing to unleash its ambitions, Intel poured cold water on it.

At the beginning of November, Intel decided to suspend the expansion plan of the factory in Vietnam, according to the previous plan, Intel will invest $1 billion for the expansion of the production capacity of the Ho Chi Minh City packaging and testing factory, if the plan goes well, the factory will become Intel's largest packaging and testing factory in the world after the capacity expansion.

According to a report by Reuters, citing people familiar with the matter, the reason for the abandonment of the investment was "concerns about stable power supply and severe bureaucracy" at Intel's top management.

Intel's statement has caused alarm in the Vietnamese government, announcing that it will soon introduce more aggressive tax breaks and land leasing policies. After all, in the early years, after Intel signed a cooperation agreement with India for a wafer foundry, it turned around and set the location of the new factory in Dalian, China, which led to the termination of the inspection by STMicroelectronics and other companies.

Mr. Wong's remarks allowed the Vietnamese government to put its concerns at ease for a while.

According to the Vietnam News Agency, at a semiconductor and artificial intelligence conference hosted by Vietnam's Ministry of Planning and Investment, Huang said that Nvidia wants to build Vietnam into a "second home" for the company, and will set up a legal entity in Vietnam to improve the local AI infrastructure and personnel skills.

Huang visited Vietnam's military electronics and telecommunications company, photo credit: Bloomberg

Although Huang has high expectations for Vietnam, Nvidia's development in Vietnam may be even more difficult than Intel's.

As a fabless manufacturer, Nvidia is not involved in wafer foundry, packaging and testing, etc., and its $250 million investment in the "chip center" can basically be determined to only serve as a research and development function.

But the problem is that there is a serious shortage of chip engineers in Vietnam.

Vu TU Thanh, head of the Vietnam office of the US-ASEAN Business Council, once said in an interview that at present, there are only 5,000-6,000 trained chip engineers in Vietnam, and the demand for chip engineers in Vietnam in the next five years is about 50,000.

Business Insider has also previously reported that there are a large number of key job vacancies in Vietnam's semiconductor industry. If Vietnam's investment in the semiconductor industry surges in the coming years, this mismatch between talent and industry development is likely to become increasingly serious.

A senior semiconductor practitioner told Tiger Sniff, "Whether it is wafer foundry or chip design, there are strong know-how attributes, and a qualified chip engineer must go through at least 5-8 years of training after graduation to fully master professional skills." ”

Vietnam currently does not have a wafer foundry, advanced chip design is in its infancy, and more importantly, Hanoi University of Science and Technology is the only university in the country that can be responsible for the professional training of microelectronics.

Will it be a threat to China?

In Asia, the shift of labor-intensive industries to Southeast Asia has become an inevitable trend, but given the high threshold of the semiconductor industry, it may be difficult to make substantial progress in a short period of time.

A foundry executive told Tiger Sniff that although some foreign companies have chosen to move their R&D centers from China to Vietnam (such as Marvell) due to geopolitical influences, the talent gap on the table will not make this behavior evolve into a trend, and in terms of foundry, even the investment in 12-inch wafer production lines with mature processes generally exceeds 10 billion yuan, and given Vietnam's relatively backward infrastructure construction level, foreign investment is unlikely to take this risk.

Especially in terms of upstream and downstream industry synergy, Vietnam does not have the conditions for wafer foundry. "Taking materials as an example, in wafer production, in addition to the core monocrystalline silicon materials, more than 200 kinds of auxiliary materials including various chemical reagents, precious metals, and special gases are also needed. With the exception of a few import-dependent industries such as hydrogen bromide, most of them have domestic alternatives, but Vietnam has almost no industrial chain in this area. ”

However, the executive said that considering that so many foreign semiconductor giants threw olive branches to Vietnam in the second half of this year, it is also a warning signal for some domestic practitioners.

Vietnam's core strength lies in the abundance of cheap labor with basic education, which is needed in the chip assembly and testing process.

"I don't quite understand why Intel's packaging and testing plant has higher requirements for electricity, in fact, the packaging and testing process can solve the problem of power outages through flexible production. The fab executive pointed out that unlike the power outage of the wafer foundry, which may lead to the scrapping of entire batches of products, the infrastructure requirements of the packaging and testing plant for backward areas are not high, and the technical threshold is relatively low.

In terms of labor costs, the wage level of Vietnam's packaging and testing factories is only about one-third of that in China.

In fact, although Intel has suspended its investment in Vietnam's packaging and testing factory, the old packaging and testing giant Amkor has already chosen to bet heavily on Vietnam. Previously, the company spent 16 to build its largest packaging and testing plant in Bac Ninh province, Vietnam, and it is directly positioned for advanced system-in-package.

封测巨头Amkor斥资16亿美元修建的封测工厂,图片来源:Viglacera

Some industry insiders pointed out that considering the current hot demand for Nvidia A100/H100 GPU, TSMC's CoWoS advanced packaging capacity is actually in short supply.

For China, the packaging and testing industry provides a huge number of jobs and economic benefits. According to the statistics of the China Semiconductor Industry Association, the number of employees in the domestic semiconductor packaging and testing industry will reach 140,000 in 2022, and the market size will reach 298.5 billion yuan.

Source: China Semiconductor Industry Association 

Considering that the packaging and testing industry is a typical labor-intensive industry, if foreign investment continues to increase in Vietnam, it may have a certain impact on the domestic packaging and testing end.

However, in any case, at least in the foreseeable 5-10 years, Vietnam has not shown the potential to transition from the packaging and testing side to the design and manufacturing side in any dimension. Therefore, the statement about the "second hometown" of the Yellow Sect Leader may be more based on some kind of political statement.