As the U.S. works to stabilize the global chip supply chain amid ongoing trade tensions with China, Vietnam has become an important focal point. “Friendshoring” is an important piece of U.S. chip strategy as the country works to boost semiconductor production in friendly nations. President Joe Biden met with Vietnamese leaders in Hanoi earlier this month to discuss ways to bolster the local chip industry and explore new partnerships.
However, despite promising signs of becoming a more notable force in the semiconductor world, Vietnam’s workforce poses a major challenge. While a shortage of chip engineers is essentially everywhere, Vietnam has a particularly low number of trained workers. Experts fear this could derail the nation’s plans for expanding its chip industry—and force the U.S. to reevaluate its strategy as well.
The chip industry is rapidly expanding, with experts projecting a massive spike in growth over the next 10 years. Technologies like artificial intelligence (AI) and electric vehicles are increasing the need for chips, especially high-performance silicon. In the U.S., reports claim there will be a shortfall of 67,000 technicians, computer scientists, and engineers by the end of the decade.
But in Vietnam, the picture is even more grim relative to its size. The nation of 100 million people has just 5,000 to 6,000 trained hardware engineers. Currently, experts believe 20,000 will be needed in five years while 50,000 will be in demand 10 years from now.
Vu Tu Thanh, head of the Vietnam office of the US-ASEAN Business Council, said in a recent interview, “The number of available hardware engineers is way below what is needed to support multi-billion-dollar investments.”
Indeed, Vietnam is well-positioned to receive huge investments in its chip industry in the coming years. The nation’s chip efforts thus far have mainly involved back-end manufacturing, including assembly, packaging, and testing. With 40% of back-end manufacturing occurring in China as of 2019, the U.S. is keen to diversify this number in Vietnam. Officials also believe Vietnam can branch into design in the coming years.
The U.S. has set aside some $500 million to invest in global semiconductor supply chains thanks to the CHIPS Act. Many believe Vietnam will be a target for a significant portion of those funds.
Elsewhere, private investment has flowed into Vietnam from companies like Intel, Amkor, Synopsys, and Marvell. Arizona-based Amkor plans to begin operations at its new $1.6 billion Bac Ninh facility in October. Intel, meanwhile, operates its largest back-end manufacturing facility in Vietnam and has discussed doubling its existing $1.5 billion operation.
But experts fear private investors considering moving into Vietnam will be scared away by the country’s lack of trained workers. Instead, they may turn to regional competitors like Malaysia and India. The latter has invested heavily in its chip sector over the past few years as it seeks to become a major semiconductor hub.
During President Biden’s meeting in Hanoi earlier this month, Vietnam officially raised the diplomatic status of the U.S. to its highest level. This puts it on par with Vietnam’s other key trade partners—China and Russia. The move has been in the works for several months as Washington has worked to foster the bond with Hanoi after several decades of icy relations.
The latest breakthrough has led to the aforementioned chip investments in the country, among other economic boosts and civil rights discussions. Indeed, it paves the way for additional partnerships and investment in Vietnam’s chip industry.
For now, though, workforce concerns remain paramount. Until Vietnam can address its current shortage, any leaps the country hopes to take in the chip world will be limited. Doing so will take a coordinated effort and likely some outside investment, but achieving a larger semiconductor talent pool would surely be a boon for Vietnam and U.S. chip ambitions.