Vietnam is getting a little tired of coffee and rice. Or at least, it wants to be known for more than being a top exporter of those commodities. So it’s eyeing a more lustrous industry: high-tech and especially electronics.
Talks of igniting Vietnam’s own Silicon Valley might be a bit much. But in recent years the country has succeeded in drawing big names like Microsoft, Samsung, and Intel. All three are making Vietnam a major link in their global manufacturing networks. That’s a sign that Vietnam has some desirable traits to help it develop a tech sector. But the question is whether it can turn that potential into an engine for economic growth.
The domestic push into a tech economy is benefiting young engineers like Nguyen Trong Nhan. He returned from Australia with a master’s in programming and quickly found a job at National Instruments last year. The Vietnamese company provides hardware and software to other businesses, but mostly to schools with science labs.
“I think we’re very good in education,” Nhan said. “But now we want to build relationships in industry.”
Most likely, there will be a larger tech industry for his company to serve in the coming years. In 2012, Prime Minister Nguyen Tan Dung signed a decision that laid out a national strategy for science and technology. It projected that by 2020, the value of high-tech products and applications should make up 45 percent of Vietnam’s gross domestic product.
Radhika Srinivasan, IBM’s program director for technology alliances and licensing, said Wednesday at the Vietnam Semiconductor Strategy Summit in Ho Chi Minh City that Vietnam was betting its future on the right field.
“Why should Vietnam – or any emerging economy really – focus on microelectronics or semiconductors?” Srinivasan asked. “It drives innovation and entrepreneurship, and hence fuels economic growth.”
Investors say they’re drawn to this nation of 90 million people because of its location near China and key shipping lanes, its emphasis on consensus and teamwork, and its entrepreneurial work ethic. Many Vietnamese citizens run family businesses and have a welcoming attitude to foreigners. Some even say it helps that the Vietnamese language, unlike Chinese, uses Roman lettering, which makes it easier for locals to adopt English, the lingua franca of global commerce. Vietnam also has favorable demographics, particularly a young, tech-savvy population that obsesses over tablets and smartphones.
“Favor factors for Vietnam are low wages and a high number of fresh graduates from university,” said Pham Ba Tuan, senior expert at CNS, a large state-run corporation that is working to build a silicon wafer fabrication facility.
The education challenge
Despite all the graduates, education remains a work in progress. Although school is the main priority for most families, businesses often complain that students enter the workforce without necessary skills. For example, Intel reportedly tested 2,000 graduates about six years ago, out of which just 40 had the technical and language capacity the company needed.
Since then, Intel has invested millions to educate Vietnamese by sending them to either a university in the United States or an Australian university with a campus in Vietnam, according to Intel Vietnam general manager Sherry Boger. Scholarship recipients work for Intel after they graduate.
Boger said a problem is that Vietnamese classrooms, where teachers lecture to students, tend to be “one-directional.”
“Students don’t feel comfortable [asking] a lot of questions,” she said. “And so what we want to be able to see in the workplace is, employees voice out their ideas, their concerns, and that we have a free-flow exchange.”
‘Quite a jump’
In addition to cleaning up infrastructure and regulations, Vietnam will need this educational progress if it wants to graduate its technology sector from the assembly line stage. Electronics recently became the country’s top export, worth $21.7 billion in the first eight months of 2014, according to the General Statistics Office.
But Vietnam’s role in that value chain mostly involves putting devices together and packaging them. To be able to create advanced products, such as semiconductor chips, Vietnam is hoping for technology transfers from foreign firms.
“This field in Vietnam is very new, and we need to absorb information and technology experience from foreigners,” Le Manh Ha, vice chairman of the Ho Chi Minh City People's Committee, said in an opening speech at the semiconductor summit.
Absorbing technology would help Vietnam’s ambitious plans to enter the silicon wafer fabrication business. Eduard Hoeberichts, founder and CEO of the Dutch semiconductor company FabMax, said that fewer than 20 countries have this “wafer-fab” ability. But he was encouraged because a week earlier, Hanoi granted another level of approvals to the wafer facility proposal from CNS.
“The importance of the decision is, it’s a statement that Vietnam is investing in real technology,” Hoeberichts said. “For a developing country, it’s quite a jump.”