Vietnam emerges as semiconductor industry "Winner" as China falls behind in innovation

The semiconductor industry is a significant factor in a country's global economic competitiveness in the digital transformation era and artificial intelligence (AI).

Indeed, the shortage of semiconductors during the raging COVID-19 pandemic has created "seismic shocks" across global economies, choking the supply of everything from headphones to the car.

Currently, autonomy in the semiconductor industry has become a matter of life and death for most economies. While many European countries are determined to stay at the forefront of this field, developed economies are also stepping up investment and international cooperation in Asia.

However, analysts said that in this transition, China was "out of breath" in an indescribable way. The world's new potential "semiconductor factory" belongs to Southeast Asia.

China's semiconductor industry: Lagging and clumsy

In an interview with Discourse, Professor George Calhoun at the Stevens Institute of Technology (New Jersey, USA) said that China's semiconductor manufacturing industry is not "frighteningly strong" like people still think.

Currently, China still has to import to meet about 90% of the needs of the domestic chip industry.

Calhoun said that semiconductors are an essential component of China's supply chain. However, 90% of the figures indicate that China has yet to reach the level it wants or the level the United States or some other countries are concerned about.

Describing China's size and "clumsiness" in its semiconductor industry policy, Mr. Calhoun said that China follows a top-down investment strategy, like the Soviet style, providing investments grants for all projects.

They have tested this method more than once. In 2022, Beijing announced a new set of incentives for semiconductor companies. What happened next was suddenly 10,000 - 15,000 companies, which were still bending metals and dry cleaning yesterday, suddenly became semiconductor companies. That's different from how the industry works.

But before that, as many as 3,000 semiconductor companies declared bankruptcy in China. Just look at those numbers, then compare them with the semiconductor industry in the US and Korea, and you will immediately see the difference.

Calhoun said there weren't 10,000 semiconductor companies in those places, and there weren't 3,000 that went bankrupt. It's a very different structure (compared to China). 90%, then 10,000 and 3,000; these numbers clearly show China is not where it wants to be.

From 2010 to 2020, China has been trying to strengthen the semiconductor industry, encouraging domestic semiconductor companies to share research and development results and restricting foreign controls on exports when attracting highly skilled human resources from abroad.

However, by the beginning of 2022, China still needs to design and manufacture a significant amount of the two highest-value semiconductor chips, including the central processing unit (CPU) and the graphics processing unit (GPU). China's share of the global market is less than 6%.

Worth mentioning that this is only part of the problem. According to Professor Calhoun, Chinese-made chips are not only of lower quality but also uncompetitive even in the Chinese domestic market.

Despite being one of the top 5 semiconductor foundries in the world, China's SMIC International Corporation only started manufacturing 14nm semiconductors in 2022. That puts the business behind its rivals for up to 3 generations or at least six years.

Chinese semiconductor companies cannot meet domestic demand for semiconductors, much less global demand. That means Chinese manufacturers will still rely heavily on high-quality semiconductors made abroad.

Potential new "stars."

The Research Report on Southeast Asia Semiconductor Chip Manufacturing Industry 2023 - 2032 shows that Southeast Asian countries are prominent in the world's chip production chain, accounting for 27% of the closed market package and test chips globally. The chip market size of Southeast Asian countries is estimated to reach more than 40 billion USD by 2028.

Also, according to this report, Malaysia, Thailand, Vietnam, the Philippines, and Indonesia, with their manufacturing base and abundant cheap labor, are becoming hot spots for global chip manufacturers to invest in building homes machine. In particular, Vietnam, the Philippines, and Thailand are the leading countries in the R&D and IC design field.

Vietnam is already part of the global supply chain of famous semiconductor companies such as Samsung and Intel, ranking 8th globally and 2nd among ASEAN countries (after Singapore). ) as an essential electronics exporter.

According to two international analysts, Timothy Wong and Michael Alexander, in the context of businesses expanding their supply chains to reduce their dependence on China, Vietnam becomes a potential name, possessing unique value to attract investment in the semiconductor manufacturing sector.

According to Bloomberg, Vietnam, Thailand, India, and Cambodia are emerging as the "winners" in the context of the US diversifying semiconductor production.

Read more: https://vietreader.com/business/81926-scope-existing-for-semiconductor-gains.html

With the remaining two large chip manufacturing markets, Vietnam and Thailand have increased their transactions with the US in this field to impressive numbers. Vietnam's semiconductor materials alone accounted for over 10% of US imports for seven consecutive months.

Meanwhile, the Sputnik news agency (Russia) said that Vietnam has the potential to become the world's new chip and semiconductor manufacturing center, bringing considerable boosts to the economy.

Also read: https://vietreader.com/business/83649-vietnam-third-top-chip-exporter-to-the-us.html

The fact that Vietnam has begun to enter the "semiconductor path" and gradually asserted its position in the chip supply chain shows reasonable strategies and calculations.

According to analysts from the Central Institute for Economic Management (CIEM), the choice of Samsung Electronics, the world's largest DRAM supplier in 2021, to manufacture transistor grids in Vietnam, with an $850 million investment, instead of prioritizing more developed locations, speaks to Vietnam's growing importance in the global semiconductor supply chain.