Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How Vietnam Is Becoming the Emerging Market Semiconductor Hub
Transcript
- Lucas: So there's this one number that's been stuck in my head all week: Vietnam's electronics exports hit a hundred and thirty billion dollars in 2025. That's up from about ninety-six billion in 2020. I mean that's a compound annual growth rate of roughly six percent in a category that's basically the most contested, highest-value manufacturing on earth. Luna: Yeah and that's not just phones and assembly anymore. Vietnam is now trying to become a serious semiconductor hub. Lucas: Exactly. And we've seen this narrative before — every emerging market wants to be 'the next Taiwan.' But Vietnam has actual heft behind it. The government approved a National Semiconductor Development Strategy in 2024 that explicitly calls for fifty thousand chip engineers by 2030. And they're not starting from zero. Luna: What's already on the ground? I know Intel has a big test and assembly plant near Ho Chi Minh City. But that's been there for years. Lucas: Right, Intel's facility is one of their largest assembly and test sites globally — they've invested over one and a half billion dollars there. But the more interesting recent moves are from Amkor Technology, which opened a two-point-six-billion-dollar packaging plant in Bac Ninh province in 2024. And Synopsys, the EDA software giant, has been expanding their design centers in Vietnam. So suddenly you've got the whole stack: design, assembly, packaging. Luna: And this is all happening because of the geopolitics. The 'China plus one' strategy is real, and Taiwan risk is pushing companies to look at alternatives. Lucas: Right. The US CHIPS Act has a provision that basically encourages allies to build secure semiconductor supply chains. Vietnam is a direct beneficiary. But here's the thing — it's not just about moving assembly lines. Vietnam is trying to move up the value chain. They're offering tax incentives of up to fifty percent for chip design projects. The government is co-investing in wafer fabrication, though that's still years away. Luna: Fifty percent tax break is serious. But can they actually produce the engineers? Fifty thousand chip engineers in six years — that's a big target. Lucas: It is. And there's a bottleneck. Currently, Vietnam graduates about five hundred to six hundred semiconductor engineers per year. To get to fifty thousand, they'd need to scale that by a factor of ten. They're partnering with universities in South Korea, Taiwan, and the US. There's a new program with Arizona State University and a few others. But talent is the long pole in the tent. Luna: So this is a classic emerging market story: ambition meets infrastructure reality. What about the dollar? Because we've been talking about the strong dollar crushing EM stocks for weeks now. Vietnam has a currency peg to the dollar, right? Lucas: The Vietnamese dong is managed tightly against the dollar, but they've let it depreciate gradually. Year to date, it's down about four percent against the dollar. That actually helps exports, which is the whole point. Their trade surplus with the US was something like one hundred and ten billion dollars in 2025. So the strong dollar isn't a pure negative for them — it makes their labor and products cheaper in dollar terms. But it does increase the cost of imported machinery, which they need for chip fabrication. Luna: So they're in this sweet spot where the strong dollar helps exports but hurts capital investment. That's a tension we see across emerging markets right now. Lucas: Absolutely. Look at the trade-weighted dollar index — it was at 120.4 as of last week, up from about 119 a couple of weeks ago. That's a headwind for any EM country that imports capital goods. But for Vietnam, the export boost probably outweighs the import cost, at least for now. Luna: And what about the competition? Other countries are also trying to become chip hubs — India, Mexico, Malaysia. Why Vietnam over those? Lucas: Good question. I think Vietnam has three specific advantages. First, proximity to East Asian supply chains — you're right next to China, Taiwan, South Korea. Second, political stability. The Communist Party is stable, there's no major geopolitical risk beyond the South China Sea. And third, cost. Labor costs are still lower than China and significantly lower than Mexico or Eastern Europe. But the real edge might be that Vietnam is willing to play ball with both the US and China. They're not picking a side, which lets them attract investment from both blocs. Luna: Speaking of the show, you know, if walking through the economy with us has made something click, there's a way to keep this going ad-free. It's just a coffee — whatever you think today was worth, that's the link. Buy me a coffee dot com slash fexingo. Lucas: Yeah, honestly, if today's episode was useful, that's the simplest way to say 'keep going.' No pressure, just appreciation. Luna: Alright — back to Vietnam. So they've got the strategy, the incentives, the geopolitics. But is there a risk that the chip industry overpromises and underdelivers? Lucas: There's always that risk. We've seen it in other countries — Malaysia tried to become a design hub, Thailand had ambitions. The wafer fab part is the hardest. Building a major fabrication plant costs ten to twenty billion dollars and requires constant water and electricity. Vietnam already has power shortages — in 2024, there were rolling blackouts in industrial zones. That spooked some investors. So they need to fix the grid before they can host fabs. Luna: But they're starting with assembly, test, and packaging — which is less energy intensive. And then maybe they move to design, then eventually fabrication. Lucas: That's the stair-step approach. And it's smart. The government has allocated about two billion dollars in incentives for the semiconductor sector from 2025 to 2030. They're also building dedicated industrial parks for chip companies. One in Da Nang, one near Ho Chi Minh City. So the pieces are there. Luna: What about the talent piece again? You mentioned the bottleneck. Is there any sign the pipeline is actually improving? Lucas: A few data points. In 2025, Vietnam had about fifty-six hundred students enrolled in semiconductor-related programs. That's up from around two thousand in 2022. So the trajectory is there, but it's a long game. Synopsys has trained over three thousand engineers through their university programs. Intel has a training center. But the demand is so high that many graduates get poached immediately by foreign companies offering higher salaries. Luna: So Vietnam is essentially becoming a talent farm for global semiconductor companies. That's not a bad position to be in, if you can keep scaling. Lucas: Exactly. And the foreign direct investment numbers back that up. In 2025, Vietnam attracted about thirty-nine billion dollars in FDI, with electronics and semiconductors accounting for roughly a third. That's a huge share. And the pipeline for 2026 looks even bigger — there are reports that another major OSAT player is looking at a multi billion dollar facility. Luna: What about the rest of the economy? Is this chip focus crowding out other sectors? Lucas: It's a risk. Vietnam has a very successful textile and footwear industry, but labor costs are rising. The minimum wage went up by six percent in 2025. So they need to move up the value chain, and semiconductors are the obvious next step. But if they pour all incentives into chips, other industries might struggle. That said, the government is trying to balance it — they still support agriculture and manufacturing broadly. Luna: I want to bring it back to the broader emerging market context. We've been talking about the divergence in EM stocks in 2026. Vietnam has been outperforming a lot of its peers. The VN Index is up about twelve percent year to date. Meanwhile, China's markets are down. What does that tell us? Lucas: It tells us that the 'decoupling from China' narrative is real. Investors are rewarding countries that offer exposure to the global supply chain shift. Vietnam is the poster child for that. But you also see it in India, Mexico, and Poland. The common thread is that these countries are manufacturing bases for companies that want to reduce China risk. And the strong dollar is actually helping their exports, as we said. Luna: So if I'm an investor looking at Vietnam, what's the key risk factor to watch? Lucas: I'd watch three things. One — infrastructure. Can they keep the lights on and the water flowing for industrial parks. Two — talent pipeline. If they can't produce engineers, the growth will cap. And three — geopolitical pressure from China. Vietnam is a neighbor, and China has economic leverage through trade and investment. If relations sour, it could affect the supply chain plans. But so far, Vietnam has managed that balancing act pretty well. Luna: So the bottom line: Vietnam is a serious contender in the semiconductor supply chain, but it's still early innings. Execution is everything. Lucas: Exactly. They've got the strategy, the incentives, and the geopolitical tailwinds. Now it's about whether they can build the human capital and physical infrastructure fast enough. If they do, they could become the next major node in the global chip map. If they stumble, another country will take that spot. Luna: I think that's a perfect note to end on. Thanks Lucas. Lucas: Thanks Luna. And thanks to everyone listening. Until next time.