The global semiconductor industry has experienced significant transformation recently, with Vietnam emerging as a promising destination for semiconductor investors. With multi-billion-dollar investments from giants such as Amkor, Hana Micron, Intel, and more recently Nvidia, Vietnam is gradually asserting its position on the global technology map, opening up opportunities to become a strategic semiconductor manufacturing and design hub in Asia.
Many countries around the world have enacted policies, legal frameworks, and incentives to attract investment and technology transfer, as well as to invest heavily in semiconductor manufacturing. Vietnam is in the process of enhancing its institutional framework, policies, infrastructure, governance, and workforce to develop the semiconductor industry in the future. Studying and learning from the semiconductor industry policies of leading countries is crucial for Vietnam to adapt these strategies to its own context.
I. Semiconductor industry development policies of leading countries
1. United States - CHIPS Act 2022
With the goal of maintaining its leadership in the global semiconductor race, in August 2022, U.S. President Joe Biden signed the CHIPS and Science Act (referred to as the "CHIPS Act"), which includes public investment of over $50 billion for domestic semiconductor production, research, and workforce development. The CHIPS Act aims to achieve two key objectives: economic development and national security protection for the U.S.
First, the CHIPS Act has significantly increased private sector participation in the U.S. semiconductor industry. Companies operating in the semiconductor field can receive funding grants of over $150 million if they meet two important conditions:
(i) The U.S. government requires companies seeking subsidies of more than $150 million to publicly disclose specific investment plans, including cash flow, profits, and to give U.S. regulatory bodies access to their production data. This is a sensitive requirement for foreign semiconductor companies due to concerns about disclosing trade secrets. Additionally, if a company earns profits beyond expectations, it must repay 75% of the grant amount to the U.S. government.
(ii) The U.S. reaffirms the principle of excluding companies intending to increase production and investment in countries of security concern. This means that to qualify for grants, semiconductor companies cannot expand investments in China for a period of 10 years, which is one of the largest semiconductor production hubs in the world. Moreover, these companies must also commit to future investments in the U.S. semiconductor industry, including research and development programs and supporting other U.S. businesses.
Next, a new policy was introduced in March 2023, six months after the CHIPS Act was signed into law: the "Advanced Manufacturing Investment Credit." This tax credit offers a 25% investment tax credit to companies building semiconductor manufacturing plants. The estimated value of this credit is around $24 billion and plays a crucial role in making domestic chip production a more attractive option compared to foreign production by reducing high labor costs in the U.S.
Developing a skilled workforce is a crucial aspect of ensuring the revival of the semiconductor industry in the U.S., as promoted by the CHIPS Act. To date, more than 50 community colleges across 19 states have introduced and expanded programs to equip U.S. workers with the necessary skills to participate in the semiconductor industry. The U.S. government considers this an "essential step" to foster a skilled workforce and promote the growth of the semiconductor industry.
The U.S. aims for a future where it can self-supply semiconductors, viewing cooperation with global partners as a key responsibility to achieve this goal. To mitigate the risk of conflicts with allies due to this self-sufficiency strategy, particularly in Northeast Asia, U.S. departments and agencies are building cooperation agreements with allied nations. These agreements ensure that overseas investments comply with the CHIPS Act framework and U.S. national security strategies, including restrictions on selling materials and chips to adversarial countries.
This is also the strategy the Biden administration has outlined to lead in the semiconductor industry. The CHIPS Act is a critical strategy for the U.S. to regain its historical position in semiconductor manufacturing.
2. Taiwan – Training and Special Incentive Policies
The close cooperation between universities, research institutes, businesses, and the government over the past several decades has made Taiwan's semiconductor industry one of the global leaders. Taiwan currently supplies more than half of the world's semiconductor chips. For the most advanced semiconductors, Taiwan accounts for 92% of the global output, according to Boston Consulting statistics.
Taiwan's semiconductor industry development model, including its workforce training system, is based on four pillars: government, companies, universities, and research and development (R&D) institutes. These four components support and complement each other to solve mutual challenges. Companies place orders with research institutes, universities seek production solutions, and recruit students from schools. Research institutes provide advanced courses and technical training for workers in companies. Universities send students for internships at both companies and research institutes. The government plays a central role by connecting, coordinating, setting overall development strategies, and providing funding. By 2023, nearly 400,000 students in fields directly and indirectly related to semiconductors have benefited from and been involved in this model.
Recently, Taiwan passed a new CHIPS Act, which includes several incentives to enhance global competitiveness in the semiconductor sector, especially as major governments are racing to bring semiconductor production back to their home countries. Notably, the law allows local semiconductor companies to convert 25% of their annual research and development costs into tax credits. This is part of Taiwan's effort to retain advanced semiconductor technology at home and maintain its leadership in the field.
3. China – "Made in China 2025"
China has set its sights on becoming a global leader in the semiconductor field through a series of policies, strategic plans, and specific regulations. Below are some of the key highlights:
(i) National Strategic Plan:
First launched in 2015, "Made in China 2025" is an overarching plan aimed at reducing dependency on imported technologies and promoting domestic production in high-tech industries, including semiconductors. The plan targets producing 70% of its semiconductor needs domestically by 2025.
Following this, the "Integrated Circuit Industry Development Plan" (2014-2030) focuses on self-sufficiency in semiconductor production, investment in research and development (R&D), and the establishment of modern chip manufacturing centers. The plan also emphasizes the development of core technologies such as AI, 5G, and quantum computing, all of which are closely related to semiconductors.
(ii) Financial and Investment Policies:
In 2014, China established the National Integrated Circuit Industry Investment Fund (Big Fund), with an initial scale of 138 billion yuan (approximately 21 billion USD), which was later expanded in 2019 (with a size of over 29 billion USD). The fund directly invests in semiconductor-related companies and strategic projects, covering areas such as production, design, and R&D.
(iii) Financial Support and Tax Incentives:Semiconductor companies in China are eligible for income tax exemptions for 5-10 years, depending on their level of technological development. Additionally, China provides tax exemptions for the import of equipment and components used in chip production.
(iv) Workforce Development:The government heavily invests in training programs and collaborates with both domestic and international universities and research institutes to develop a skilled workforce. There are also policies encouraging overseas Chinese talents to return and contribute to the semiconductor industry.
(v) Public-Private Partnerships:China promotes partnerships between the government, large companies (such as SMIC and Huawei), and research organizations to accelerate technology transfer and innovation in the semiconductor field.
In conclusion, with the aim of achieving technological self-sufficiency and becoming a global leader in the semiconductor industry, China has implemented a series of long-term development strategies and introduced numerous policies to prioritize investments in this critical technology.
4. South Korea – Expanding Tax Incentives for the Semiconductor Industry
As the fourth-largest economy in Asia, South Korea heavily depends on semiconductor exports. However, recent export figures have significantly declined due to the global downturn in the semiconductor sector. In response, the South Korean government introduced the "Korean Semiconductor Act", which includes expanded tax reductions for investments in the semiconductor industry to ease the burden on South Korean chip manufacturers competing in the global semiconductor arms race.
The Special Tax Act, passed by the National Assembly, aims to enhance support for the semiconductor industry by increasing tax incentives for chip manufacturers and other strategic industries. The K-Chips Act focuses on boosting tax credit rates for companies investing in national strategic industries, including semiconductors, secondary batteries, and electric vehicles.
Under the new provisions:
The tax credit rate for large corporations will rise from 8% to 15%, while for small and medium-sized enterprises (SMEs), it will increase from 16% to 25%.
Companies will also receive an additional 10% tax reduction on investments made above the average investment levels of the past three years.
According to the Korea Economic Research Institute, South Korea's top 10 chipmakers could save up to 360 billion Korean Won (approximately 277 million USD) if the tax deduction/credit rate increases by just 1%.
5. Japan – Subsidies and Ambitious Projects
Japan’s policies regarding the semiconductor industry are focused on technological self-sufficiency, international collaboration, and workforce development. With a strong technological foundation and significant government support, Japan is aiming to reinforce its position in the global semiconductor supply chain.
The Japanese government announced a comprehensive plan with a budget of over 600 billion yen (approximately 5.2 billion USD) to develop the semiconductor and quantum technologies sector, under the initiative "Semiconductor and Quantum Technology Policy" (2021). This plan includes boosting investments in R&D to develop advanced chips, including those below 2nm.
Recently, the Japanese government also stated that it would continue to provide support for TSMC, a major semiconductor manufacturer, to build a second semiconductor manufacturing plant in Kumamoto Prefecture. This plant will produce chips ranging from 6 to 7 nanometers, a significant advancement compared to Japan's current ability to produce chips with 40nm technology. TSMC is the world’s largest independent semiconductor foundry, manufacturing chips for top tech companies such as Apple, Qualcomm, and AMD. While TSMC’s primary production facilities are in Taiwan (China), it has expanded globally, including to Japan.
The government of Prime Minister Fumio Kishida has allocated 4 trillion yen (approximately 26.7 billion USD) in subsidies over three years to strengthen Japan’s semiconductor production capabilities, with the goal of increasing domestic chip sales from 10 trillion yen to over 15 trillion yen by 2030. Japan's semiconductor production strategy is centered around two main pillars:
Attracting foreign chip manufacturers through subsidies.
Implementing ambitious projects to regain leadership in chip technology and reduce reliance on unstable external supply sources.
Furthermore, other major industry players such as Micron Technology, ASML, and Samsung Electronics are also investing in manufacturing or research facilities in Japan, drawn by its skilled workforce, reliable services, and strong government support policies.
II. Some Lessons for Vietnam
Given the fierce competition from developed nations in semiconductor technology in recent years and the growing demand for semiconductors in products of the digital transformation era, Vietnam needs to carefully study and draw lessons from the policies of leading countries in the field. This will help build long-term and mid-term plans and strategies for the development of the semiconductor industry, step by step engaging in different segments of the global semiconductor supply chain, and enhancing international cooperation. This will ensure that in the next 10-20 years, Vietnam will not be left behind in this vital global industry.
2024 is the first year Vietnam implements its national strategy for semiconductor industry development. The semiconductor industry is recognized as a foundational and critical sector for Vietnam in the next 30-50 years. The Prime Minister has also issued a strategy for science, technology, and innovation development until 2030, which prioritizes the semiconductor industry as a high-tech field. The government has tasked relevant ministries and agencies with developing a Human Resource Development Plan for the Semiconductor Industry by 2030 and a "Semiconductor Industry Development Strategy for Vietnam by 2030, Vision 2045". Furthermore, the 8th Plenary Session of the 13th Central Party Committee, held on October 18, 2023, emphasized the need to "focus on training 50,000 to 100,000 highly skilled workers for the semiconductor production sector by 2025-2030." The Ministry of Information and Communications is actively working with domestic and international experts, as well as consulting firms, to finalize the content of the draft Vietnam Semiconductor Industry Development Strategy until 2030, Vision 2045.
Given the high level of development in the global semiconductor industry, where technology capabilities vary between countries, Vietnam needs to have policies that attract investments in the semiconductor sector, cooperate with foreign countries, and carefully consider the goals and benefits of potential partners in building investment and technology transfer plans. To attract investment, Vietnam must evaluate various models, including FDI investments, joint ventures, or full technology transfers, so that the country can gradually master and develop the necessary technologies in the semiconductor field.
Based on successful policy experiences from countries like the United States, Japan, South Korea, Taiwan, and China, we propose the following recommendations:
Early Implementation of Practical Policies and Laws
Vietnam should promptly issue policies and regulations aligned with the real-world operations of semiconductor businesses, ensuring that foreign companies investing in the semiconductor sector, as well as domestic companies already involved in chip manufacturing, can easily benefit from government incentives, including tax breaks and infrastructure support.
Tax Policy:
Vietnam should study the CHIPS Act from the United States and South Korea's K-Chips Act to create larger tax reductions for investments in the semiconductor industry. This will help alleviate the burden on companies and attract investment into semiconductor manufacturing. Reducing taxes on semiconductor-related investments can help Vietnam build a competitive edge and incentivize both local and foreign companies to invest in chip production.
Human Resources:
To meet the growing demand for highly skilled labor in the semiconductor industry and leverage cooperation with advanced semiconductor-producing nations, Vietnam should consider amending laws to allow the hiring of highly skilled foreign workers. Moreover, Vietnam should establish a dedicated high-tech governance framework to facilitate investment and absorb advanced technologies. The human resource development plan for the semiconductor industry should include not only technical professionals but also experts in legal, policy, and judicial fields.
Vietnam could also draw inspiration from Taiwan's successful model, which relies on a four-pillar framework for workforce development: government, companies, universities, and research and development (R&D) institutes. These four pillars work together, supporting each other and solving mutual challenges. Universities can supply research solutions and students for internships, companies can fund research institutes and offer job opportunities, and the government can coordinate and provide strategic direction and funding.
Public-Private Partnership for Semiconductor Investment:
Vietnam should explore and develop policies to attract semiconductor industry investment through public-private partnerships (PPP). It is essential to support large private corporations, such as Viettel, FPT, and Vingroup, in establishing semiconductor manufacturing plants. Key focus areas should include:
Increasing investment in R&D for semiconductor technologies.
Collaborating with foreign countries on research and technology transfer.
Improving the country's technology absorption capacity, training high-level technical experts.
Engaging Vietnamese experts abroad to contribute to policy consultation, and actively involve them in R&D projects and semiconductor production in Vietnam.
By leveraging international experiences and integrating effective strategies into its national policy framework, Vietnam can position itself as an emerging player in the semiconductor industry. It will be crucial for Vietnam to remain agile and forward-thinking, ensuring that its semiconductor industry evolves alongside global technological trends and the increasing importance of semiconductors in the digital economy.
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