Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How Vietnam Is Becoming the Next Global Semiconductor Hub
Transcript
- Lucas: So the big story in global trade right now — beyond the dollar rally and the us china tensions — is where the next semiconductor manufacturing hub is emerging. And if you look at the data, one name keeps popping up: Vietnam. Luna: Vietnam? I mean, we've talked about Taiwan, South Korea, even Mexico for auto manufacturing. But Vietnam seems like a dark horse for chips. Lucas: Exactly. It's not a dark horse anymore. In the last eighteen months, multinationals have committed over eleven billion dollars to semiconductor projects in Vietnam. Intel already has a huge assembly and test facility near Ho Chi Minh City — one of their largest globally. Samsung is building a new chip packaging plant. And Amkor, the us based packaging giant, just broke ground on a two-billion-dollar facility. Luna: That's serious money. What's driving the rush? I assume it's not just the labor costs. Lucas: Labor is part of it — wages in electronics manufacturing are roughly a third of what they are in China. But the bigger factor is geopolitics. As the US tightens export controls on advanced chip equipment to China, companies are looking for alternative locations that are politically stable, have trade agreements with both the US and Europe, and are close to existing supply chains. Luna: Vietnam checks those boxes. They're part of the CPTPP and have a free trade deal with the EU. And they're not seen as a threat by Washington. Lucas: Right. So the US government has been actively encouraging companies to diversify into Vietnam. The CHIPS Act doesn't fund projects there directly, but the messaging is clear: Don't put all your eggs in Taiwan. And the market is responding. We're seeing a wave of foreign direct investment that's reshaping the whole region. Luna: Let's talk numbers. The EEM emerging markets ETF is down over three percent in the past five days. Vietnam's not in that index, but it's part of the broader emerging market story. Are investors pricing in this shift? Lucas: They are, but not uniformly. Vietnam's own stock market — the vn index — has been relatively resilient. The bigger picture is that the strong US dollar, still around 120 on the trade-weighted index, creates headwinds for a lot of emerging markets. But Vietnam has managed to keep its currency relatively stable, partly because of the inflow of FDI. That's a real advantage over, say, South Korea, which has seen the won tumble. Luna: Worth noting that South Korea's EWZ — sorry, EWY — dropped over ten percent in five days. That's massive. So capital is clearly rotating out of some Asian markets. Is Vietnam capturing some of that? Lucas: I think so. But it's not a simple story. Vietnam faces real bottlenecks. The power grid is strained — there were rolling blackouts last summer that hit industrial parks. And the skilled labor pool is thin. You can't just hire thousands of chip engineers overnight. Luna: So what's the government doing about that? Lucas: They've launched a national semiconductor strategy. They're ramping up training programs, partnering with universities in South Korea and Taiwan. They're also offering tax incentives — a five-year holiday and reduced rates after that. It's a classic catch-up playbook, but it takes time. Luna: Let's zoom in on one specific project. The Amkor facility — what does it actually do? Lucas: Amkor is one of the world's largest providers of semiconductor packaging and test services. That's the stage after the chip is designed and fabricated — you put it into a protective package and test it. This facility in Bac Ninh province, north of Hanoi, will focus on advanced packaging for things like 5G, automotive chips, and high-performance computing. It's expected to create ten thousand jobs. Luna: And that's exactly the kind of high-value manufacturing that Vietnam wants to move into. They don't want to stay as a low-cost assembly hub. Lucas: Precisely. And this is where the comparison to Taiwan gets interesting. Taiwan's semiconductor dominance didn't happen overnight — it began with packaging and test in the 1970s, then moved into foundry. Vietnam seems to be following a similar trajectory, but in a compressed timeline. Luna: But Taiwan also had a state-led push and a lot of returning diaspora engineers. Does Vietnam have that? Lucas: Not yet. The Vietnamese diaspora is large, but most are in software, not semiconductors. So there's a talent gap. Still, I think the trajectory is real. The question is whether Vietnam can avoid the middle-income trap and actually sustain this shift. Luna: Speaking of sustaining — if this episode has been useful to you, maybe it's moved your thinking forward in some small way. That's exactly why we do this show ad-free. And the way we keep it that way is through listener support — buy me a coffee dot com slash fexingo. Lucas: Yeah, it genuinely helps. We don't have sponsors, we don't run ads. Just listeners who find value and want to keep that going. So if you're able, that's the link. Luna: Alright, back to the chips. Lucas, you mentioned the talent gap. How is Vietnam actually trying to close it? Lucas: One concrete initiative: they've set up a national semiconductor research and training center under the Ministry of Science and Technology. They're also offering scholarships for students to study chip design in Taiwan and South Korea. And companies like Intel and Samsung are running their own training programs — they need the talent, so they're investing in building it. Luna: But that's a long game. In the meantime, do you see any risks that could derail the whole thing? Lucas: Several. One is infrastructure — the power grid issue I mentioned. Another is bureaucracy. Despite reforms, setting up a factory in Vietnam still involves more red tape than in Malaysia or Thailand. And there's the China factor. Vietnam is politically close to China in some ways, but also has its own South China Sea disputes. If tensions escalate, it could complicate the investment narrative. Luna: And then there's the global demand picture. Semiconductor demand is cyclical. We've seen downturns before. Lucas: Right. But the long-term drivers — AI, 5G, electric vehicles — suggest demand will keep growing. The question is whether Vietnam can capture the next wave of investment, especially in fabrication. Right now, the fabrication plants, the fabs, are still concentrated in Taiwan, South Korea, and the US. Vietnam's role is assembly and test, which is lower margin. Luna: Could they ever get a fab? That's a whole different level of investment — twenty billion dollars plus. Lucas: It's not impossible, but it's unlikely in the next decade. The ecosystem requirements are enormous: ultra-reliable power, massive water supply, extremely pure chemicals, and a deep talent pool. Vietnam isn't there yet. But if they succeed in packaging and test, they could gradually move up the value chain. Luna: Let's tie this back to the macro picture. The dollar is still strong, the yen is weak, and emerging markets are diverging. How does Vietnam fit into that? Lucas: When the dollar is strong, it's harder for emerging markets to service dollar-denominated debt. But Vietnam has relatively low external debt, and its FDI inflows are mostly equity, not loans. So they're less vulnerable than, say, Argentina or Turkey. Plus, the strong dollar makes Vietnamese exports cheaper in dollar terms, which helps their trade balance. Their exports of electronics have been growing at about fifteen percent year-over-year. Luna: So in a world where everyone is worried about supply chain concentration, Vietnam is positioning itself as a safe pair of hands. Lucas: Exactly. It's not a perfect story — there are risks. But the direction is clear. And for anyone tracking global trade, Vietnam is one of the most interesting markets to watch over the next five years. Luna: I think you're right. It's a concrete example of how geopolitics is redrawing the map of global manufacturing. Lucas: And that's the key takeaway for today. Next episode, we'll look at another shifting piece of the global trade puzzle.