Vietnam Bolsters Energy Infrastructure to Fuel Semiconductor Industry Growth

“We will fine-tune our institutions.”

Vietnam is strategically aiming to secure ample energy resources to support the needs of chip and other tech companies. The competition, particularly with neighboring Malaysia, for semiconductor investments, is acknowledged as challenging.

To attract chip investors, Hanoi plans to implement various measures including tax incentives, increased research funding, and infrastructural developments such as power generation. Deputy Minister Tran Duy Dong emphasized the urgency of the situation, recognizing the intensifying global competition and the pressing concern of electricity shortages impacting businesses.

Acknowledging the rapid pace of international competition, Dong stressed the importance of Vietnam's proactive approach. Countries like India and Malaysia are also aggressively pursuing semiconductor investments, adding to the urgency for Vietnam to act swiftly.

Driven by geopolitical tensions and disruptions in the global supply chain due to the COVID-19 pandemic, many companies are diversifying their production away from China, particularly in critical tech sectors like semiconductor manufacturing. This presents a unique opportunity for Vietnam and other countries to establish themselves in the chip industry, albeit amidst fierce competition for investment and skilled labor.

Vietnam faces challenges such as seasonal electricity shortages, especially during the dry season when hydropower supply diminishes. This has previously disrupted operations, including those of major companies like Samsung. The process of attracting semiconductor fabrication companies, which require stable power supply, is expected to be time-consuming and intricate.

To address energy concerns, Vietnam is ramping up its energy projects, including a significant 500-megawatt project scheduled for completion later this year to cater to the energy demands of northern Vietnam, where chip investments are focused.

Despite ambitions to transition towards renewable energy and reduce carbon emissions, Vietnam is increasing its coal imports substantially to meet immediate energy needs, potentially conflicting with environmental goals and the pressure on companies to decarbonize their supply chains.

Vietnam already hosts numerous chip companies, including Intel's major test and assembly plant. In recent years, efforts have been intensified to move beyond basic manufacturing, with plans for the establishment of chip research centers and collaboration with private entities and universities to train engineers.

Deputy Minister Dong's recent engagements underscore the significance of the semiconductor industry in Vietnam's agenda, with meetings held with industry executives, Taiwanese academics, and U.S. officials to discuss strategies and opportunities.

“We will fine-tune our institutions,” The Minister said. “The state budget we are spending will be considerable.”

In addition to existing incentives for high-tech investors, Vietnam is open to considering further measures, including tax incentives, to attract investment in the semiconductor sector. The government is committed to enhancing institutional frameworks and allocating significant resources from the state budget to support these initiatives.