Hanoi sees greater potential in semiconductor industry after Joe Biden’s visit

President Biden’s recent trip to Hanoi on 10 September marked a significant milestone in the decades-long process of rebuilding bilateral relations between the United States and Vietnam after the end of the Vietnam War. The government-to-government agreement signed during this historic visit has paved the way for transformative collaborations, with a particular focus on bolstering Vietnam’s rapidly growing semiconductor industry.

In this blog post, we will explore number of outcomes related to semiconductor sector that foreign firms considering relocating to Vietnam should be aware of.

Vietnam’s access to CHIPS and Science Act funding

The CHIPS and Science Act is a law signed by Joe Biden to allocates US$280 billion to boost the US semiconductor manufacturing industry. Additionally, it earmarks US$500 million over five years for the International Technology Security and Innovation Fund (ITSI Fund), aiming to enhance the global semiconductor supply chain’s diversity, resilience, and security, as stated on the U.S. State Department website.

A significant portion of the ITSI fund could be channeled towards Vietnam, according to officials cited by Reuters. Vietnam has successfully tapped into this fund through a Memorandum of Cooperation on Semiconductor Supply Chains, Workforce and Ecosystem Development. This agreement will utilize the ITSI Fund “to enhance its semiconductor ecosystem, regulatory framework, and workforce,” paving the way for Vietnam to strengthen its position in the global semiconductor industry.

Furthermore, as stated in a White House statement, “the United States and Vietnam announced the launch of semiconductor workforce development initiatives – supported by initial seed funding of $2 million from the U.S. government, in conjunction with future Vietnamese government and private sector support.” This initiative highlights the commitment of both nations to foster a skilled workforce capable of supporting Vietnam’s growing semiconductor industry.

Regional integration of electronics supply chains

Another component of the U.S.-Vietnam semiconductor chip partnership will be the development of the Developing Electronics & Leading Technology Advancement Partnerships (DELTA) Network. This initiative intends to bring in regional governments and industries to promote talent cultivation, policy coordination, and sector efficiencies, fostering a more integrated electronics supply chain in the region.

Joint research and development

Both countries have also committed to the establishment of the Vietnam-U.S. Science and Technology Agreement for Research (VUSTAR). This body’s mandate is to identify areas of collaboration between the U.S. and Vietnam in artificial intelligence, R&D and governance, health and medical science, climate science, biotechnology, and conservation.

This collaboration aligns with the broader initiatives aimed at strengthening Vietnam’s semiconductor sector and fostering advancements at the intersection of technology and critical scientific domains.

Development of high-skilled workforce

One of the biggest challenges identified in Vietnam has been a lack of high-skilled labor in the manufacturing sector. This is particularly true of the semiconductor industry. According to Reuters, Vietnam currently only has about 5,000 to 6,000 semiconductor engineers but will need up to 20,000 in the next five years and up to 50,000 in the next decade.

In this context, Biden’s visit to Hanoi produced two key initiatives:

  1. STEM Champions of Vietnam Initiative: This initiative connects U.S. and Vietnamese government educational institutions to strengthen science, technology, engineering, and math education, fostering a skilled workforce.
  2. The Upskill Vietnam and Foster Digital Growth program: Through USAID, US$12.75 million will be utilized to assist the Ministry of Education and Training (MOET) in modernizing and internationalizing higher education in Vietnam, addressing the need for skilled professionals in the evolving digital landscape.

Final thoughts

The upgrade of the relationship between the U.S. and Vietnam to a comprehensive strategic partnership is a coup for both parties. Moving forward, however, there is still room to grow. The current trade agreement between the two nations is now two decades old and in need of an upgrade. Furthermore, as ongoing geopolitical challenges strengthen the U.S.’s resolve to diversify out of China, Vietnam stands to benefit from even greater foreign direct investment from the U.S.

In this light, the economic relationship between these two former foes, at least soon, is likely to become even stronger and more robust.

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