The government of Thailand plans to establish a national semiconductor board to set investment and development strategies for this vital industry, Commerce Pichai Chunhavajira said on 14 June 2024. This came after Vietnam declares match with Malaysia, who plans to build Southeast Asia’s largest integrated circuit design park and will offer incentives including tax breaks, subsidies and visa exemption fees to attract global tech companies and investors.

Bangkok Post quoted Pichai adding longtime major investor can help Thailand move up the value chain. He urged Japanese businesses to invest in Thailand, especially in the semiconductor and high-tech industries. The government expects to see more investment from Japan because, after the 2014 coup, investment from the country fell by as much as 90% and has not yet returned to pre-2014 levels, Pichai said on 24 September 2024.

China was the leading source of foreign direct investment in Thailand in 2023, while Japan had slipped to fourth place, However, the value of approved Japanese projects in the first seven months of this year has topped the table at THB 40.2 billion, according to Board of Investment figures.

“We hope Japan will increase its investments in Thailand. I would like to request Japan takes another look at Thailand as a manufacturing location, based on our sincere intentions. We’ll put in a lot of effort to help you. The Board of Investment also has incentives to support you,” he said at an event to mark the 70th anniversary of the Bangkok office of the establishment of the Japanese External Trade Organization (Jetro).

The industry the government wants to promote the most right now is semiconductors because a lot of international printed circuit board (PCB) companies have shifted their production bases to Thailand, with a total investment of about THB 150 billion last year.

The bulk of this, according to data from the Bank of Thailand, comes from firms in China, Taiwan, Japan and Hong Kong. Pichai said there would be increased investment in the industry.

“We would like Thailand to serve as the production base for semiconductors and PCBs. Thailand will also welcome Japanese companies to grow or relocate their production bases from China,” he said.

Furthermore, the government aims to encourage foreign investment in the high-tech sector. If Thailand can transition to this, it will raise the standard of skilled labour and award workers higher pay, he said. He added the government also aims to boost the electric vehicle sector, making the nation the centre of production for all right-hand drive EVs.

“The world needs clean, green energy. The trend is preparing for this, which is quite significant for Thailand as it gives us a chance to catch up with the opportunity. Electric vehicles are the way of the future; combustion vehicles are losing ground,” he pointed.

When asked if Japan still has reservations about EVs and prefers to focus on hybrid cars, Pichai said these are another way to address the shift to cleaner energy use.

“Japan may still believe in hybrids more than EVs. It depends on their school of thought,” he said.

“Today, China has more than 400 EV brands, and only about 100 will survive. Yet China will continue to be the world’s primary supplier of EVs, which will fuel market growth.”

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This is on top of Malaysia current pool of about 90,000 engineers. The goal is to boost Malaysia’s position in the global semiconductor market, currently valued at RM575.45 billion (S$174 billion). 

One of the talents driving this effort is Dr Salleh Ahmad, who recently returned to Malaysia after earning a degree in microelectronics at ESIEE Paris and working in France. Now, he is leading Weeroc’s operations at their new facility in Selangor’s Integrated Circuit (IC) Design Park as chief technology officer (CTO). This facility in Puchong is central to Malaysia’s plans to advance from traditional semiconductor services to high-value fabless manufacturing and IC design.

According to The Straits Times, Dr Salleh noted, “Malaysia is a good choice due to its bright industry prospects, government incentives, and the low cost of doing business.” The push for more engineers is driven by the country’s plan to double its chip sector output and market share by 2030.

Currently, Malaysia’s chip sector contributes 7% to global exports and aims to increase this to 15%, boosting its market value from RM575.45 billion to RM1.2 trillion. The strategy is built around three Rs: recruit, retain, and return—bringing in new engineers, keeping existing talent, and encouraging Malaysians working abroad to return home.

The newly opened Puchong chip design hub, touted as one of the largest in Southeast Asia, plays a crucial role in this strategy. It needs up to 400 local engineers, with 60 already hired. According to Ng Sze Han, Selangor’s state executive councillor for investment, the hub offers salaries up to RM6,000 for new graduates.

This is much higher than the national median of RM2,600 and surpasses the salaries in Selangor (RM2,900), Kuala Lumpur (RM3,900), and Penang (RM2,645). This is intended to attract and retain skilled engineers in Malaysia.

“Anchor tenant MaiStorage has established an office in the park. Five Malaysians who previously worked at Taiwan’s Hsinchu Technology Park have returned to lead and mentor local hires as qualified IC designers,” he noted.

Although in Taiwan and France, engineering graduates can earn up to RM9,000 and RM17,000 a month, they usually need a master’s degree. 

When asked about competing with countries like Singapore, Mr Ng said that Malaysia “can’t treat Singapore as a competitor” but rather as part of a larger supply chain. “Our cost of doing business is lower than Singapore,” he noted.

He also added that not all talents seek the highest salary or a fast-paced environment; many prefer a better quality of life, which Puchong offers. Companies like MaiStorage, a subsidiary of Taiwan’s Phison Electronics, have already established a presence in the park. Mai Storage’s investment could further stimulate Malaysia’s semiconductor sector, potentially drawing back Malaysian engineers working overseas.

Phison’s Malaysian co-founder, Pua Khein Seng, said he believes “Malaysia is more convenient, even though its efficiency is lower than Taiwan in terms of output.”

Mr Pua also mentioned that if Malaysia’s IC design sector takes off as expected, MaiStorage will require at least 500 engineers to meet its operational needs. Meanwhile, Penang Chief Minister Chow Kon Yeow is optimistic that the “Silicon Valley of the East” will attract and keep skilled workers. He noted that Malaysia is home to over 30 IC design companies, with 28 of them based in Penang.

The talent pool in Penang is well-established, and its capital, Georgetown, is launching a new initiative called “Penang Silicon Design @5km+” to attract, hire, and develop essential talent. MSIA’s Mr Wong added that Malaysia’s chip industry has built a strong ecosystem over the past five decades, helping to retain talent through competitive pay, good job prospects, and a balanced work-life environment. 

Major local companies like Oppstar, SkyeChip, Infinecs, and global giants such as AMD and Intel have employed over 7,000 engineers in Penang alone. Infineon Technologies, Germany’s largest semiconductor manufacturer, with over 500 employees in Penang, boasts one of the lowest attrition rates in the sector. 

According to Dr Raj Kumar, Senior Vice-President for Technology and Research and Development at Infineon, the company’s 5% turnover rate is well below the industry average of 10 to 15%, thanks to ongoing career development and training.

The Big Question

India is reportedly planning to send a group of people to Singapore for training, and have the group import the knowledge acquired domestically to boost semiconductor manpower in preparation for the booming industry.

According to Business Standard, in an effort to build talent for the semiconductor industry in India, the India Electronics and Semiconductor Association (IESA) is planning to send a batch of people — from industry to academics — on deputation to Singapore in the coming months. This is part of the recently-announced memorandum of understanding (MoU) with Singapore Semiconductor Industries Association (SSIA).

Ashok Chandak, President, IESA told the media, “What we are looking at is sending some of the people on deputation to Singapore and the SSIA would support. These people will spend three to six months in some of the fabs, get some training, come back and implement that in India. So, this is how the overall skill and talent development concept is going to work.”

A study by TeamLease Degree Apprenticeship revealed India’s semiconductor industry is expected to face a shortage of 250,000-300,000 professionals across various verticals by 2027. These include research and development (R&D), manufacturing, design, and advanced packaging. The collaboration between IESA and SSIA will have professionals and experts cross visit to train domestic talent.

Ashok added the Indian semiconductor is reportedly also exploring a similar partnership with its Taiwanese counterparts. However, Singapore is preferred since it has an advantage in terms of language and connectivity.

Meanwhile, Chinese semiconductor companies have also been actively recruiting talent from South Korea and making strategic acquisitions and investments, triggering concerns within the South Korean semiconductor industry in the recent years. 

The semiconductor industry, being the backbone of technological advancement, and its success is inherently linked to the skill and knowledge of its workforce. South Korea, home to tech giants like Samsung Electronics and SK Hynix, possesses a rich supply of semiconductor talent coveted globally. However, the aggressive recruitment efforts from China’s tech firms have raised concerns despite known shortcomings.

Given almost is powered by chip technology — from our smart devices to automotive, the competition can only get tighter and China is not inclined to be left behind in the competition. It brazen poaching of Korean talent is a strong message yet back-handed compliment to the latter country’s talent quality.

Amid China’s mission to achieve semiconductor self-sufficiency, the republic strategically targeted Korea’s pool of skilled engineers and researchers. Offering lucrative incentives and promising career prospects, Chinese companies have lured talent away from their Korean counterparts.

Malaysia is aggressively positioning itself as an optimum semiconductor hub. While claims were made that Singapore should not be deemed as a competitor, it just might be a tall order given trade means revenue. It will be worthwhile watching how the chip talent shifts around Malaysia, Singapore, China and Korea. 

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The significance of the electronics and semiconductor industry is on the rise. With Industry 5.0 taking precedence, the integration of chipsets to reduce the size of electronic devices is becoming vital. To meet this demand, manufacturers are prioritising technological innovation.

Different countries have various roles to play in the progress of semiconductors. Depending on the geopolitical scenario, geographical position, and key internal factors, the contribution of the country can be determined.

In the case of Indonesia, the progress of the semiconductor sector is significantly influenced by both internal and external factors. Notably, the impact of consumer demand has been instrumental in driving the market forward.

However, various pitfalls are affecting the progress of the industry, and different parameters impede the growth of the market. Let us dive deep into key trends and factors that govern the progress of the industry. Cause-and-effect relations of such factors can shed some light on the current and prospective occurrences.

Effect Of Current Events On The Indonesian Semiconductor Industry

As far as the current events are concerned, the Indonesian government’s growing focus on initiatives like ITSI and boosting FDI is proving to be a significant factor in augmenting the semiconductor market. The International Technology Security and Innovation (ITSI) fund ensures that the local value creation gets bolstered. Along with this, the global supply chains can be diversified. The effect leverages better local production, which supports the local producers.

The government’s commitment to attracting foreign direct investments is expected to benefit producers significantly. This, coupled with the potential for lowered production costs, could lead to increased profit margins and revenue generation capacity, creating more promising opportunities for key players.

Another key initiative observed is the development of infrastructural projects. Due to this, not only manufacturers but also retailers and sellers are benefitted. This has been a key part of the ITSI implementation policy.

Along with the development of resources, the government of Indonesia focuses on elevating the skill levels of people. To achieve this goal, different specially-designed courses are dedicated to provide knowledge of the electronics and semiconductor industry.

To cater to the changing approach toward technological progress, research and development activities are more favoured. With the fund allocation for carrying out proper research related to the industry, the country has been able to create innovative and cutting-edge products.

Due to this innovation, Indonesia has become a key exporter of semiconductor goods. To compete with large-scale exporters like China, such moves have been essential. Although semiconductors hold a negligible position in exports of Indonesia, the global figures suggest that the country is ranked 27^th among the top exporters of semiconductors.

Read more here at page 42

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Source: NST

“We are proud to officially launch the Malaysia Semiconductor IC Design Park, three months after its initial announcement at the KL20 Summit in April. This remarkable progress within such a short time frame highlights the swift execution and unwavering commitment of all stakeholders involved,” Selangor Information Technology & Digital Economy Corporation (Sidec) CEO Yong Kai Ping.

The Malaysia Semiconductor IC Design Park, set up in collaboration with the federal government, international semiconductor firms, and venture capitalists, aims to position Malaysia as a potential powerhouse in the global IC design industry. The strategic initiative is designed to leverage Malaysia’s technological capabilities and resources, fostering innovation and advancing the country’s reputation in high-tech manufacturing and design.

The Malaysian government disclosed in April its plans to build Southeast Asia’s largest integrated circuit design park and will offer incentives including tax breaks, subsidies and visa exemption fees to attract global tech companies and investors.

The park site was meticulously chosen after an extensive evaluation process among the locations in Klang Valley. The process considered key factors essential for semiconductor companies, such as size, power capacity, building status, office fittings, potential for future expansion, and public transport accessibility.

The park is designed to house more than 400 IC design engineers from five local, international, and JV IC design companies. It includes anchor tenants Maistorage, Skyechip, Weeroc, AppAsia ChipsBank, SensoremTek Sdn Bhd and supported by ecosystem partners such as BlueChip VC, ARM Holdings, Cadence Design System, Synopsys, Siemens EDA and Keysight and Shenzhen Semiconductor Association.

Economy Minister Rafizi Ramli who was present at the launch, said the country needs to focus on developing its own semiconductor design capabilities rather than just relying on imported chips. He outlined the federal government’s strategic direction to enhance the entire semiconductor ecosystem, covering both upstream and downstream sectors, with a particular emphasis on original design manufacturers (ODM).

“The country is currently receiving significant investment into data centres, but data centres also require ODM. Therefore, the government is looking at the entire ecosystem to complete it. As this ecosystem takes place, data centers in Malaysia will begin to consider “Made by Malaysia” chips. That is the consideration the federal government is looking for,” he said at the launch.

Selangor Menteri Besar Datuk Seri Amirudin Shari said that Selangor does not aim to be a bit-part player in the semiconductor space, but intends to see semiconductors of the future with the label “Made in Malaysia, Designed in Selangor”.

“This should be our aim. This is our rallying call. This is crucial if we want to make Selangor Malaysia’s first RM 500 billion  economy in the coming three years. The primary goal of the park is to promote original design manufacturing, encouraging local involvement in product design, prototyping, and production. This project is not just about infrastructure; it is about creating opportunities and driving growth,” he added.

The park’s promoters are actively recruiting skilled candidates with degrees in electrical & electronics engineering, mechanical engineering, mechatronics, and computer science, offering highly competitive salaries. Entry-level positions start between RM5,000 and RM6,000 for fresh graduates, while individuals with a master’s degree or extensive industry experience can earn up to RM7,000. 

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According to Business Standard, in an effort to build talent for the semiconductor industry in India, the India Electronics and Semiconductor Association (IESA) is planning to send a batch of people — from industry to academics — on deputation to Singapore in the coming months. This is part of the recently-announced memorandum of understanding (MoU) with Singapore Semiconductor Industries Association (SSIA).

Ashok Chandak, President, IESA told the media,

“What we are looking at is sending some of the people on deputation to Singapore and the SSIA would support. These people will spend three to six months in some of the fabs, get some training, come back and implement that in India. So, this is how the overall skill and talent development concept is going to work.”

A study by TeamLease Degree Apprenticeship revealed India’s semiconductor industry is expected to face a shortage of 250,000-300,000 professionals across various verticals by 2027. These include research and development (R&D), manufacturing, design, and advanced packaging. The collaboration between IESA and SSIA will have professionals and experts cross visit to train domestic talent.

Ashok added the Indian semiconductor is reportedly also exploring a similar partnership with its Taiwanese counterparts. However, Singapore is preferred since it has an advantage in terms of language and connectivity.

He explained English-speaking Singaporeans smoothens communications between both nations, but can’t say the same with Taiwan, despite the attractiveness of its semiconductor manufacturing prowess.

“One of the challenges we face with Taiwan is the language barrier, particularly at the lower-operator level. At the senior level, most people are proficient in English, so there is no problem there. However, at the operator level, this barrier can be more pronounced. In contrast, this is not a big issue in Singapore, as more people speak English there,” Ashok noted.

Under the partnership with SSIA, the two main priorities will be skills-training and the technology know-how partnership between Indian and Singaporean firms, said Ashok.

“There are several companies in Singapore which have the knowledge and technology at multiple value-chain levels of semiconductor manufacturing. This is right from design to testing to wafer fab, assembly test marking operations, logistics and distribution. They have got a very good amount of talent and knowledge experience. We want to bring that as part of the partnership. Priority-wise, number one is the skill training, and then business-to-business technology cooperation, technology transfer and joint venture arrangements in the future,” he added.

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Source: CNA

If you are using your mobile phone or computer to read this article, you may not know that a tiny chip powers them, along with millions of other electronic devices. Many of these chips are made in Singapore – and now, the country is looking to expand its chip-making capacity.

Government industrial planner JTC told CNA that it is preparing 11% more land in Singapore’s wafer fabrication parks, in a bid to attract more top semiconductor giants and ride the artificial intelligence wave. The semiconductor sector employs about 35,000 people and accounts for almost 20 per cent of the country’s manufacturing output.

Manufacturing is Singapore’s largest industry by far, representing a significant component of its gross domestic product – more than 20%. Currently, nine out of the 15 top semiconductor firms have set up shop in Singapore. 

They include American chipmaker Micron and German wafer manufacturer Siltronic, which opened a S$2.9 billion (US$2.16 billion) advanced manufacturing facility in Tampines last month. These semiconductor firms are currently clustered in four wafer fabrication parks that span 374 ha, the size of more than 500 football fields.

These parks are in Pasir Ris, Tampines, Woodlands and the North Coast, with JTC being the master planner and developer of the land. JTC said the new plot, part of which is in the eastern region of Singapore, will be ready by the end of the year. 

Companies looking to set up there will be able to get customised roads and even new water piping, which helps to sweeten the deal. As chipmaking is a delicate affair, semiconductor fabrication plants need to be close to stable power and water supply for constant cooling. They cannot be near MRT stations or other heavy industries due to mini vibrations that could affect production.

Expansion Of Facility To Boost Capacity

GlobalFoundries, the world’s third-largest contract chipmaker, has had a presence in Singapore since 2010. It runs one of the largest wafer plants here and can produce about 1.5 million 300mm wafers annually. Last year, the firm added 23,000 sqm – equivalent to about four football fields – of space to boost capacity amid a boom in demand.

The company manufactures integrated circuits on wafers designed for smart mobile devices and markets like automotive, aerospace and defence. Some of its biggest customers include semiconductor companies such as Qualcomm. JTC played a “very key role” in building GlobalFoundries’ US$4 billion expanded fabrication plant, said its Senior Vice President Tan Yew Kong. He told CNA that Singapore, which has 55 years of semiconductor history, was able to provide a network to supply materials and infrastructure.

“We are definitely here to stay, and looking at the market sentiment of regionalisation, friendshoring, all these approaches – definitely, having a location like Singapore to support the global footprint is a very necessary thing,” he added.

Friendshoring refers to the act of manufacturing and sourcing from countries with similar geopolitical stances. Mr Tan pointed out that the industry is set to almost double from US$600 billion to US$1 trillion, which means building a factory in advance is “very important”.

“We are pacing ourselves so that when the market is there, our toolsets are all turned on, ready for it. The good news is that actually, our tools are here. We just need to fire it up and get it ready,” he added.

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Foreign companies are moving their manufacturing facilities out of China to establish production hubs in other countries as trade tensions continue to brew between China and the US. Malaysia, the world’s sixth largest exporter of semiconductors in the world, has greatly benefited from this strategy known as China Plus One, where companies diversify their business outside of China.

Malaysia has a 50-year edge in the sector given that Intel established its first international manufacturing plant in the northern state of Penang. Intel is also building another factory in Penang that will be the US States chip giant firm’s overseas facility for advanced 3D chip packaging. Malaysia is on a particularly attractive spot given that many semiconductor and electric vehicle companies relocating to Southeast Asia to bypass trade restrictions and strengthen their supply chains.

The country has an existing ecosystem in Penang and the neighbouring Kulim in Kedah. This provides an option for technology companies seeking to date-risk amidst intense rivalries between the US and China over cutting-edge technologies.

Philippines — The Alternative Location

It seems Philippines is also attracting attention from Chinese enterprises, Manufacturing Asia noted. JLL, a global real estate company, states that companies are diversifying their manufacturing locations across India and Southeast Asia, including the Philippines, to offset supply chain disruptions in China.

China has dominated global manufacturing for decades. However, JLL noted that companies are “increasingly diversifying their operations elsewhere, adding manufacturing bases outside of China to hedge against supply chain disruptions.” Rising costs in China, the firm said, have pushed manufacturers to expand to other countries, with land prices in China being up to twice higher than in Southeast Asian countries and India.

Michael Ignatiadis, JLL Asia Pacific Head of Manufacturing Strategy stated that diversification within supply chains is a natural step for companies involved in manufacturing within the wider economic lifecycle of Southeast Asia and India. The Philippines, in particular, has caught the attention of the US with its inclusion in the CHIPS Act, which aims to expand and diversify the semiconductor supply chain such as integrated circuits, RF/microwave, and assembly and testing services.

JLL also noted the record-high of US$49.1 billion in electronics exports in 2022, including consumer and industrial electronics, as well as telecommunication equipment. The firm, added the manufacturing sector should make a careful evaluation of non-cost or qualitative factors when deciding to diversify.

Skilled labour, infrastructure, environmental regulations, proximity to suppliers and political stability are all crucial for long-term success and sustainability in manufacturing operations. Peter Guevarra JLL Asia Pacific Director and research consultancy said that each economy in Southeast Asia is at a different level of its manufacturing storey.

“But we can confidently say that policymakers are extremely keen to take advantage of diversification initiatives of supply chains,” he stressed.

Companies must also carefully evaluate various factors such as costs, market access, infrastructure, labour and governmental support before making investment decisions. 

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Public Investment Bank Bhd (PublicInvest) remarked Malaysia’s PMI is expected to follow global trends, consistently exceeding the 50-level mark in the second half of 2024, as long as global uncertainties stabilise. The company added Malaysia’s manufacturing sector is set for positive growth in 2024, driven by strong projections in the global semiconductor market.

With electric and electronic (E&E) exports making up over 40% of Malaysia’s total exports, the sector is expected to benefit significantly. Despite the tension between countries and economic uncertainties, Malaysia’s exports are predicted to increase by 5.4% year-on-year in 2024. Improved economic governance and competitiveness ranking also support this positive outlook.

PublicInvest also noted the average PMI reading for the Q2 2024 reached its highest level since the third quarter of 2022, indicating a positive trajectory for economic growth throughout the quarter. However, the firm mentioned business sentiment declined for the fifth consecutive month in June, reaching its lowest point since August 2023, which could impact some optimism.

Kenanga Research shared similar sentiments, anticipating significant growth in the manufacturing sector due to strong domestic demand and foreign direct investments. The labour market is expected to improve with the implementation of the progressive wage policy, supporting recovery in the manufacturing sector. Additionally, the firm believes that the global semiconductor industry’s improvement, driven by computing needs and China’s economic recovery, will benefit Malaysia.

Thus, Kenanga Research has maintained its optimistic GDP projection of 4.5% to 5%in 2024, in line with forecasts from Bank Negara Malaysia and the Ministry of Finance. S&P Global Market Intelligence reported Malaysia’s manufacturing sector remained steady at the end of the second quarter, supported by an increase in new orders over the past two months. Whilst demand overall remained subdued, higher exports partly contributed to this growth.

In June, the seasonally adjusted S&P Global Malaysia Manufacturing PMI was 49.9, slightly less positive compared to May. However, the average reading for the Q2 2024 was the highest since the Q3 2022, suggesting a positive outlook for economic growth during that period.

Tight Competition

In the semiconductor sector, competing for pole position between Malaysia and Vietnam is intensifying. Semiconductor competition continues after Malaysia announced her mission to be Southeast Asia’s largest integrated circuit design park last April. Now, Vietnam joins the competition for the same crown, with the support from an American semiconductor titan – Marvell Technology Inc.

Marvell Technology, Inc., a titan in data infrastructure semiconductor solutions, accelerated the growth of its workforce and presence in Vietnam in the past year since the company announced plans to expand R&D, engineering and design activities in the country. Marvell committed to 50% growth of its workforce in Vietnam in three years, a target shared by the company during last year’s U.S.-Vietnam Innovation and Investment Summit attended by Marvell Chairman and CEO Matt Murphy. Today, Marvell is ahead of its plans, achieving more than 30% growth in just eight months.

Marvell has also expanded its physical footprint in Vietnam with a new location in Da Nang, adding to its offices in Ho Chi Minh City. The growth of its footprint demonstrates the company’s commitment to creating a world-class semiconductor design hub in the country.

While the commentary did not specify semiconductor per se, consumer electronics manufacturing and exports should not be used as a blanket indicator for the country’s performance into H2 2024.

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The post Malaysia Manufacturing Sector To Grow In H2 Despite Dip In June appeared first on Asia Pacific Metalworking Equipment News | Manufacturing | Automation | Quality Control.

Vietnam is in the top 10 for semiconductor exports, with 6% annual growth projected until 2027. This is in spite of the government’s (Ministry of Planning and Investment) recent report revealed after Vietnam started applying the global minimum tax of 15% in January, many multinationals operating or planning to enter the country sought financial incentives since their profits would be affected, but did not receive it and relocated to other countries.

Austrian semiconductor firm AT&S planned to invest in Vietnam and even carried out a survey of the country, but eventually shifted to Malaysia as Vietnam did not offer incentives or had the required number of skilled workers. The Ministry added expansion of some big high-tech projects has gone to the back burner while waiting for the subsidy.

Yet, Manufacturing Asia reported Vietnam’s capital Hanoi is taking steps to achieve its goal to become a hub for semiconductor production by 2050. This lofty ambition is part of Vietnam’s National Master Plan for 2021-2030.

Vietnam envisions itself to become an upper-middle-income nation by 2030, buoyed by developments and investments in science, innovation, technology as well as digital transformation. Given the existing US-China trade tensions on top of the growing global demand for chips, Vietnam is poised to develop as a semiconductor manufacturing hub. 

Vietnam is included in the top 10 in the world for the export of semiconductor devices and integrated circuits, with the industry predicted to grow at an annual rate of 6% until 2027. The country is also the third biggest semiconductor exporter to the US in 2023, reaching US$562 million up from US$321 million in 2022. 

The Southeast Asian nation already has attracted several international semiconductor producers who have established operations such as Infineon Technologies AG, Amkor Technology Group, Samsung, Qualcomm, and Texas Instruments. Samsung had invested a total of US$22.4 billion into the country’s high-tech sector. 

Hana Micron Vina has committed to invest US$1 billion to boost Vietnam’s chip production by 2025. Nvidia, one of the largest semiconductor producers in the world, targets setting up a base in Vietnam with the company already having invested US$250m in the Southeast Asian nation.

Minor Role

Vietnam’s contribution is considerably small when the entire supply chain is considered. The country mainly participates in the final stage of semiconductor production, focusing on assembly, testing, and packaging, and thus represents the lower value of the supply chain. 

The lingering challenge for the country is to elevate itself in the supply chain by developing its design and packaging capabilities to have greater influence in the global semiconductor industry. Hanoi has distinct advantages that can position itself atop the semiconductor supply chain given that it is strategically located in the centre of the Red River delta. 

The location is an important axis for political, economic, and scientific activities in Vietnam. Hanoi is also one of the leading localities for foreign direct investment (FDI). The city alone attracted US$1.7 billion in FDI in 2022, ranking it amongst the top seven destinations for FDI inflow in Vietnam.

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The post Hanoi Gunning For Southeast Asia’s Semiconductor Hub Position appeared first on Asia Pacific Metalworking Equipment News | Manufacturing | Automation | Quality Control.

Vietnam’s subsidies pause has caused investors to look else where. The government’s recent report revealed after Vietnam started applying the global minimum tax of 15% in January, many multinationals operating or planning to enter the country sought financial incentives since their profits would be affected, but did not receive it and relocated to other countries.

Austrian semiconductor firm AT&S planned to invest in Vietnam and even carried out a survey of the country, but eventually shifted to Malaysia as Vietnam did not offer incentives or had the required number of skilled workers. The Ministry added expansion of some big high-tech projects has gone to the back burner while waiting for the subsidy.

Some large companies have intended suspending new investment or expansion plans if the Government does not offer financial assistance while also levying the global minimum tax. They include a medical devices manufacturing project worth between US$500 million and US$1 billion in the southern Dong Nai Province by SMC of Japan, and expansion by Foxconn, Compal and Quanta of Taiwan to produce equipment for Apple, IBM and Cisco.

The Ministry said without a subsidy or other similar policies, the application of the global minimum tax rate would detract from the effectiveness of corporate income tax incentives, and the country would no longer be attractive enough for foreign investors. It urged the Government to take immediate measures to prevent a wave of relocation out of Vietnam by major investors. It proposed the establishment of an investment support fund to provide direct financial support to businesses meeting certain criteria.

In practice, financial support and subsidies are not paid out immediately but are based on project implementation and allocated to specific costs. For example, under the U.S.’ CHIPS Act, the government will provide 25% of investment in production facilities over a 10-year cycle.

During this period, if the business does not build or sells off the facilities, the subsidy will be revoked. The global minimum tax applies to multinationals with total consolidated revenues of €750 million (US$800 million) or more in two of the four most recent consecutive years. A total of 122 foreign-invested enterprises are required to pay this tax in Vietnam, according to the tax authorities.

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Letter to the Editor
Do you have an opinion about this story? Do you have some thoughts you’d like to share with our readers? APMEN News would love to hear from you!

Email your letter to the Editorial Team at Christellee@epl.com.sg

The post Lack Of Subsidies Causes Vietnam To Lose Investors appeared first on Asia Pacific Metalworking Equipment News | Manufacturing | Automation | Quality Control.