Semiconductor chip competition and opportunities

Semiconductor chips are the “brains” of most modern electronic devices, from mobile phones and personal computers to drones, artificial intelligence, 5G, blockchain applications and robots. Even in the transportation sector, information and control systems rely on chips to maintain safety and performance. Given such importance, it is not surprising that the global chip market size surpassed US$600 billion in 2022 and was projected to reach US$1,400 billion by 2029.

In the U.S., 88% of chips used domestically are imported, mainly from China and Taiwan. To avoid the risk of supply dependence, the U.S. is looking for alternative chip manufacturers and Vietnam has emerged as a promising option.

Vietnam has the advantage of becoming the world’s chip manufacturing hub. According to VNBC, the country has emerged as an alternative production base to China for global semiconductor manufacturers. According to research company Technavio, the semiconductor market value in Vietnam will increase by US$1.65 billion from now to 2025.

In July 2023, during her first visit to Vietnam, U.S. Secretary of the Treasury Janet Yellen said that the U.S. was working with partner countries to increase investment, including a new fund worth US$500 million for international semiconductor and telecommunications projects under the CHIPS Act of the U.S.

“Vietnam has emerged as a critical node in the global semiconductor supply chain,” she said, adding that the U.S. wants to enhance cooperation with Vietnam in supply chain development, including in semiconductors.

In fact, Vietnam - after becoming a preferred destination of the world’s leading electronics corporations - is gradually attracting many semiconductor projects, including the nearly US$ 1.5 billion project invested by Intel in Ho Chi Minh City.

Besides the U.S., many other developed countries are seeking to invest in semiconductor components manufacturing in Vietnam. South Korea has Samsung and Amkor Technology that have invested in production factories in Bac Ninh province. China has Victory Giant Technology Group that has invested US$293 million in Hoang Mai I Industrial Park (Nghe An province), and is expected to start operation in mid-2025.

Germany has Infineon Technologies AG which provides switching lines and semiconductor solutions for power systems and IoT. The firm has also established a chip development team working in Hanoi. A representative of Infineon Technologies AG said that Hanoi City has the potential to become an internationally renowned research and development center, comparable to Infineon’s centers in Germany, Austria, India and Singapore.

Some Vietnamese corporations are also researching and developing semiconductor chips. FPT Corporation will have seven new chip lines this year. The corporation currently has the first chip supply contract for partners, with orders for 25 million chips in 2024 and 2025. The firm is also fulfilling an order for 2 million chips for Japanese partners.

In addition, Viettel Group is cooperating with many partners from the U.S., South Korea and India in chipsets, hardware and software for 5G and will soon commercialize them. These are encouraging signs for the Vietnamese microchip industry.

Development opportunities from rare earth

Rare earth is the input for high-performance magnets in electric vehicles, 5G mobile networks, photovoltaics, microchips and wind turbines, as well as in telecommunications and defense sectors. China currently has the largest rare earth reserves in the world, about 44 million metric tons.

According to the United States Geological Survey (USGS), Vietnam has the second-largest rare earth reserves in the world, estimated at 22 million tons. Vietnam’s rare earth production increased to 4,300 tons in 2022, which is an 11-fold increase from 2021 (more than 400 tons).

Currently, Vietnam aims to increase rare earth production to 2.02 million tons by 2030, extracted from nine ore sites in northern provinces, including Lai Chau, Lao Cai and Yen Bai. From 2030, Vietnam will have 3-4 new mining projects to increase raw rare earth production to 2.11 million tons by 2050. In addition, Vietnam will invest in rare earth processing facilities, with an annual production target of 20,000 tons to 60,000 tons of rare earth oxides (REO) by 2030. The plan also aims to increase annual output from 40,000 tons to 80,000 tons by 2050.

Let’s do some simple math. Given the current average price of US$110,000 per ton, Vietnam’s rare earth is worth up to US$2,420 billion, which is a significant figure for the country’s economic development.

Rare earth deposits in Vietnam have been discovered since 1958, including two large ore deposits in Lai Chau province as well as lower-value placers in some coastal areas. Geological surveys and assessments were conducted from 1958 to 1969 in Nam Xe and Dong Pao ore deposits. Other major rare earth deposits were found in Muong Hum in Lao Cai province and Yen Phu in Yen Bai province.

Although the full assay reports are not available for the latter discoveries, the available data indicate that these ore deposits contain minimum proven reserves of 11 million tons of rare earth oxides, including Nam Xe - 7.7 million tons, Dong Pao - 3.17 million tons, Muong Hum - 400,000 tons and Yen Phu - 5,000 tons. Sampling and assessment studies showed that the ore deposits in Nam Xe contain 11 million tons of rare earth oxide reserves more than the previously stated figure.

Participating in the semiconductor chip supply chain and having abundant rare earth reserves is an opportunity for Vietnam to develop the economy and achieve the goal of becoming a developed, high-income country by 2045, the 100th anniversary of the country.