For a lot of the previous three a long time, Vietnam’s financial success has rested on turning into one of many world’s value-for-money manufacturing locations. Vietnam acknowledges that corporations and international locations world wide are in search of to ameliorate their China danger by having one other nation (the “plus one”) as a supply of assets (e.g., crucial minerals) and manufacturing.
Now, recent off its World Financial institution reclassification as an upper-middle-income nation, Hanoi has a much more formidable goal: to develop into an indispensable participant within the bodily layers underpinning synthetic intelligence (AI).
Semiconductors sit on the heart of that ambition. Over the previous two years, Vietnam has unveiled a sequence of initiatives that collectively quantity to considered one of Southeast Asia’s most formidable semiconductor methods. The federal government plans to prepare 50,000 semiconductor engineers by 2030, launch a $100 million enterprise capital fund impressed by Israel’s Yozma program, dramatically enhance public spending on science and expertise, entice further overseas funding from world expertise leaders, and safe home provides of uncommon earth minerals which are crucial inputs into chip manufacturing.
Taken collectively, these initiatives symbolize one thing extra important than Vietnam’s previous strategy to industrial coverage. Hanoi is utilizing financial statecraft to place itself inside world worth chains as a method of fueling continued financial development and sovereignty.
The ambition is clear, however whether or not these insurance policies ship will rely on whether or not they genuinely construct technological capabilities. Traditionally, the financially strapped state invested too little in science and expertise and a “two-speed” financial system endured, the place overseas corporations working in Vietnam didn’t successfully translate into upskilling Vietnam’s corporations and workforce. Can this push be completely different?
From Meeting and Testing Hub to Semiconductor Design and Manufacturing Technique
Vietnam’s authorities is now hustling to rework its meeting and testing, and low-cost benefits, into one thing extra formidable and, hopefully, sturdy.
Resolution No. 1018/QD-TTg, adopted in September 2024, lays out Vietnam’s nationwide semiconductor growth technique via 2050. The technique is captured within the slogan “C = SET +1.”
The components envisions Vietnam’s chip {industry} (C) because of constructing specialization (S), electronics (E), and expertise (T). The “+1” displays Vietnam’s ambition to develop into the popular different vacation spot for semiconductor funding as corporations search to diversify provide chains past China.
On the core of this components is Vietnam’s ambition to transfer past its outsourced semiconductor meeting and testing (OSAT) providing. Vietnam goals to develop into an more and more refined participant throughout semiconductor design, packaging, testing, and finally manufacturing.
The roadmap is formidable in its amount indicators, however much less concrete across the high quality.
Throughout the first section (2024-2030), Vietnam plans to draw at the very least 100 chip design corporations, set up one semiconductor fabrication facility, and develop 10 packaging and testing crops. By 2040, these targets rise to 200 design corporations, two fabrication crops, and 15 packaging and testing amenities. By 2050, the federal government hopes Vietnam will host 300 design corporations, three fabrication crops, 20 OSAT amenities, and develop into an internationally aggressive heart for semiconductor analysis and manufacturing.
To allow this scale of exercise, the technique emphasizes coaching giant volumes of Vietnamese staff. The federal government has dedicated to coach 50,000 semiconductor engineers by 2030. Universities are quickly increasing semiconductor packages whereas corporations are growing partnerships with instructional establishments to develop specialised expertise.
The technique is correct to deal with abilities and expertise. Taiwan’s semiconductor success, for instance, rested as a lot on a long time of funding in engineering training and technical know-how as on the sophistication of TSMC’s fabrication crops themselves.
Vietnam seems to acknowledge this lesson. The problem will probably be in delivering on these government-industry-university collaborations to ship coaching packages on the high quality and scale wanted.
A Step-change in S&T Funding
The Vietnamese authorities’s science and expertise spending has traditionally underperformed that of different international locations, together with China, compared to comparable moments of their upgrading trajectory. As an illustration, fairly than the two p.c China was allocating to S&T within the mid 2010s, solely 0.7 p.c of the Vietnamese state price range was spent on S&T.
That seems to be altering. The 50,000 chip engineers coaching program has allotted a $1 billion price range. Final month, Vietnam introduced plans to determine a $100 million enterprise capital fund.
Beforehand, the constructing of Vietnam’s VC market went “across the state,” fairly than benefitting from authorities fund of funds or co-investment. Startup initiatives centered on comparatively cheap packages resembling Techfest and Vietnam Silicon Valley, not substantial public funding.
Extra not too long ago, nonetheless, Hanoi has introduced plans to extend science and expertise spending to between 3 and 4 p.c of the state price range, alongside main infrastructure initiatives and considerably bigger investments in innovation.
The problem, nonetheless, is whether or not the spending, and particularly the enterprise capital initiative, are spent successfully.
The $100 million fund is impressed by Israel’s Yozma program, which famously fostered Israel’s nascent VC {industry} within the early Nineteen Nineties. Yozma was not merely a authorities funding fund allocating to initiatives and startups. It was designed to catalyze a complete enterprise capital {industry} by partnering with non-public fund managers and requiring substantial overseas co-investment. These worldwide traders introduced greater than capital. They launched world networks, funding experience, and an exterior sign of high quality that helped combine Israeli VCs (and startups) additional into worldwide markets, particularly america.
The important thing to Yozma’s success lay in institution-building. From the start, Yozma was meant to develop into out of date; the design was to denationalise in 5 years, with the fund serving as a one-time catalyst for constructing a cohort of early-stage Israeli VCs. It delivered: by 2000, Israel’s VC market was second in absolute dimension to solely america. Many international locations, together with New Zealand, Singapore and Taiwan, have tailored native variations of Yozma.
Vietnam’s proposed adaptation stays much less clear.
The Ministry of Science and Know-how mentioned it’s going to “regularly mobilize non-public capital, accounting 30 to 40 p.c of the full capital, alongside the event of separate funds for various expertise sectors.” The fund might want to report back to the Nationwide Meeting and speaks of “market-based recruitment and compensation” that can enable autonomy to the “fund’s funding council.” This sounds extra like a authorities VC fund than the Yozma mannequin that catapulted Israel’s VC {industry} from a handful of small funds to a thriving market.
Worldwide expertise, together with proof mentioned in my e book “The Enterprise Capital State” and Josh Lerner’s “Boulevard of Damaged Desires,” reveals that authorities enterprise funds typically wrestle when political targets substitute industrial self-discipline.
Equally essential, Vietnam right now differs basically from Israel within the early Nineteen Nineties. In contrast to Israel on the launch of Yozma, Vietnam already possesses a longtime enterprise capital ecosystem. Corporations resembling Mekong Capital, VinaCapital, Dragon Capital, IDG Ventures Vietnam, and quite a few worldwide traders have operated within the nation for many years.
This raises essential coverage questions. Is the target of Vietnam’s Yozma-inspired VC fund to strengthen current enterprise capital capabilities, to crowd in further worldwide institutional traders, or just to extend the quantity of capital? The reply issues as a result of completely different designs are wanted.
The Problem of Amount Versus High quality
Vietnam’s semiconductor technique is spectacular in its ambition. But one notable function of the roadmap is that many targets measure the variety of corporations fairly than technological functionality. Establishing 100 design corporations says comparatively little about how Vietnam intends to compete alongside the semiconductor frontier.
The corporations will deal with mature chips, which implies specializing in the 32-nanometer chips utilized in automotive, industrial gear, and telecoms. It isn’t striving to chase the superior chips, now at 5 nm or much less, that Taiwan dominates.
The intention is to leverage present design exercise in Vietnam. Japanese corporations like Panasonic and Toshiba, and Korean giants like LG and Samsung Electronics, are already current. Intel has, famously, invested greater than $4 billion in its facility exterior of Ho Chi Minh Metropolis since 2007.
Vietnam’s personal champions, FPT Semiconductor and Viettel, are increasing their capabilities. They’re performing some if it in partnership with world leaders in AI, together with Nvidia. FPT Company, for instance, is investing $200 million in constructing an AI manufacturing facility that includes tremendous computer systems based mostly on Nvidia’s H100 Tensor Core graphic processing unit (GPU) expertise.
That is promising, although questions stay about whether or not the “two-speed” financial system will converge, and Vietnam’s nationwide capabilities advance. Figuring out that requires measuring greater than the variety of taking part corporations.
China’s Made in China 2025 technique, for instance, established specific targets round world market share and technological self-sufficiency. Whether or not or not these targets have been absolutely achieved, they mirrored an understanding that industrial functionality in the end is dependent upon efficiency fairly than participation.
Delivering on Vietnam’s Chip Technique
Vietnam enters this new section with important momentum. It was one of many world’s fastest-growing economies in 2025, extending greater than 30 years of sustained financial development because the doi moi reforms.
The federal government’s semiconductor technique demonstrates rising capabilities and willingness to speculate large in upgrading capabilities. The course of journey is due to this fact optimistic.
The central problem for Vietnam is now considered one of making certain absorptive capability: that overseas funding generates home technological studying; that engineering graduates develop world-class capabilities fairly than merely growing headcount; that authorities enterprise capital funding expands its internationally linked traders fairly than serves as a state financing automobile which will crowd out market-based capital.
Competing in AI chips is among the defining options of twenty first century geopolitics. Vietnam has appropriately acknowledged that this presents an historic alternative. The query now could be whether or not its financial statecraft may help foster really aggressive chip design or manufacturing capabilities.
