03 important notes for investors regarding Vietnam’s semiconductor industry development strategy to 2030 and vision for 2050

In Industry 4.0, semiconductor chips are becoming increasingly important, acting as the “heart” of all electronic devices. Accordingly, on 21 September 2024, the Prime Minister of Vietnam issued Decision No. 1018/QD-TTg, which outlines Vietnam’s semiconductor industry development strategy to 2030 and vision for 2050 (“Decision 1018”). This Decision is not only a breakthrough but also a clear message to the business community, especially investors, regarding Vietnam’s commitment to building a modern and competitive semiconductor ecosystem.

In this article, BLawyers Vietnam presents three important notes for investors regarding Vietnam’s semiconductor industry development strategy in the coming years.

1. Vietnam’s semiconductor industry development formula

Pursuant to Decision 1018, the Government has laid out a roadmap for semiconductor industry development with a unique approach using the following formula:

C = SET + 1

In which:

C: Chip (Semiconductor chip);

S: Specialized (Specialized, Specialized chip);

E: Electronics (Electronics, Electronics industry);

T: Talent (Talent, Workforce);

+ 1: Vietnam (Vietnam is a new, safe destination in the global semiconductor supply chain).

With this formula, the Government’s aim is to develop Vietnam’s semiconductor industry through prominent policies and orientations such as:

1. Increasing production of semiconductor chips, particularly specialized chips, aiming to gradually replace general-purpose chips. This will create many opportunities for domestic manufacturers to drive technological innovation;
2. Developing the semiconductor industry in tandem with the electronics industry and the digital transformation sector; prioritizing AI chip production to create demand for semiconductors;
3. Building a global workforce hub for the semiconductor industry, not only for Vietnam but also for outsourcing and labor export in the semiconductor industry; and
4. Developing Vietnam into a “+1” choice for countries worldwide, leveraging its geopolitical location and strategic relationships with major semiconductor industrial powers.

2. Vietnam’s semiconductor industry development roadmap

Vietnam’s semiconductor industry development roadmap is divided into the following three phases:

Phase 1 (from 2024 to 2030):

1. Selectively attracting foreign investment;
2. Establishing at least 100 design companies, 01 small-scale semiconductor chip manufacturing factory, and 10 semiconductor packaging and testing factories; and
3. Developing some specialized semiconductor products in certain industries.

Phase 2 (from 2030 to 2040):

1. Developing the semiconductor industry by combining self-reliance and foreign investment;
2. Establishing at least 200 design companies, 02 semiconductor chip manufacturing factories, and 15 semiconductor packaging and testing factories; and
3. Gradually achieving self-reliance in the design and production of specialized semiconductor products.

Phase 3 (from 2040 to 2050):

1. Establishing at least 300 design companies, 03 semiconductor chip manufacturing factories, and 20 semiconductor packaging and testing factories.
2. Mastering research and development in the semiconductor field; and
3. Completing the Vietnamese semiconductor industry ecosystem with capabilities to lead in certain segments of the production chain.

3. The measures and tasks proposed to attract investment in the semiconductor sector

Following the development roadmap outlined in Item 2, the Government has introduced five key tasks, each accompanied by specific solutions, including: (i) developing specialized chips; (ii) developing the electronics industry; (iii) developing a skilled workforce and attracting talent in the semiconductor field; (iv) attracting investment in the semiconductor sector; and (v) addressing other related tasks and solutions.

For the task of attracting investment in the semiconductor sector, the Government has set out the following measures:

1. Implementing the highest incentives to selectively attract foreign investment projects; establishing an administrative single window mechanism for investment projects in the semiconductor and electronics industries;
2. Conducting research and establishing an Investment support fund to mitigate the impact of the global minimum tax;
3. Prioritizing foreign companies in the semiconductor/electronics field that conduct research and development in Vietnam, using Vietnam’s supporting industries, and establishing joint ventures with Vietnamese businesses;
4. Establishing a green lane mechanism and other mechanisms to facilitate supporting industries, import-export enterprises of raw materials, equipment, and components related to the semiconductor and next-generation electronics industries; and
5. Investing in digital infrastructure, electricity, and water infrastructure, applying price support mechanisms for electricity and water to meet the needs of semiconductor and electronics manufacturing factories in planned development zones; and prioritizing the development of renewable energy and green energy for the semiconductor and electronics industries.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. BLawyers Vietnam would love to hear from you.

Date: 24 October 2024

Writers: Chi Huynh and Chau Dang