Vietnam accelerates in chip manufacturing as South Korea & Japan bolster semiconductor sectors in response to international trade pressures & competition.
The global semiconductor industry, a cornerstone of modern technology, is changing in response to geopolitical tensions and changing economic landscapes.
As trade disputes between major powers intensify, particularly between the US and China, countries across Asia are repositioning themselves within the semiconductor supply chain.
This realignment is driven by a combination of factors, including the need for supply chain diversification, national security concerns and the pursuit of technological self-sufficiency.
Semiconductors, the tiny chips that power everything from smartphones to advanced military equipment, have become a focal point of this international competition.
Their strategic importance has led governments worldwide to invest heavily in domestic chip production capabilities, transforming the industry’s global footprint.
While China and Taiwan currently dominate the back-end manufacturing sector, which involves testing and packaging chips, other countries in the region are rapidly expanding their capabilities to capture a larger share of this lucrative market.
Now, particularly in light of the US election, Asia is preparing for turbulence in the semiconductor industry.
Vietnam’s growing role in semiconductor manufacturing
Vietnam is emerging as a key player in the global semiconductor industry, particularly in the back-end manufacturing sector.
This segment of the industry, which involves the testing and packaging of chips, is less capital-intensive than front-end chipmaking but still plays a crucial role in the overall supply chain.
A report published by the US Semiconductor Industry Association and Boston Consulting Group says Vietnam is expected to increase its share of global capacity in chip assembling, testing and packaging (ATP) from just 1% in 2022 to between 8% and 9% by 2032.
This growth is largely driven by investments from foreign companies seeking to diversify their operations away from China.
Additionally, Vietnam’s ambitious plans also extend beyond back-end manufacturing.
The country aims to have one small-scale semiconductor chip fabrication plant and 10 assembly, packaging and testing (APT) factories by 2030.
Semiconductor investments in Vietnam
Several major international semiconductor companies have also announced significant investments in Vietnam.
Hana Micron
Hana Micron for instance, a South Korean firm, is investing US$930m until 2026 to boost its packaging operations for legacy memory chips in the country.
Cho Hyung Rae, Hana Micron’s Vice President for Vietnam, told Reuters that the expansion is in response to requests from industrial clients who want to move some production capacity away from China.
Amkor Technology
Reuters reports that a US-based Amkor Technology has announced a US$1.6bn plan to build a 200,000 square metre factory in Vietnam, which the company says will become its most extensive and advanced facility.
Intel
Meanwhile, Intel, another major player in the semiconductor industry, already operates its largest chips back-end factory in Vietnam and had a significant presence at the country’s first international semiconductors exhibition near Hanoi.
FPT
Domestic players are also contributing to Vietnam’s semiconductor industry growth.
For example, Vietnam tech firm FPT is building a testing factory close to Hanoi, with plans to start operations early next year.
The 1,000-square-metre plant is expected to begin with 10 testing machines, tripling capacity by 2026, with an investment of up to US$30m.
South Korea & Japan bolster domestic semiconductor industries
While Vietnam is attracting foreign investment in chip manufacturing, other Asian countries are taking steps to strengthen their domestic semiconductor industries.
For instance, in South Korea, the ruling party has proposed a special chips act aimed to provide subsidies and exemptions from working hour caps for chipmakers, in response to potential US trade measures under President Trump.
Pat Gelsinger, CEO of Intel, emphasises the importance of ‘The CHIPS Act’ to MIT Management, which is the broader act that provides US$52bn in funding for American companies to create and expand chip manufacturing facilities, saying it is the: “most significant piece of industrial policy legislation in the US since World War II.”
Yet this move from South Korea comes in response to potential risks from measures threatened by former US President Trump, including steep tariffs on Chinese imports that could impact Korean chip firms.
The special chips act aims to help Korean companies compete with rivals in countries such as China, Taiwan and the US, which are also providing subsidies to their domestic manufacturers.
Reuters says that the semiconductor industry is critical for South Korea’s trade-dependent economy, with chips making up 16% of total exports last year.
Meanwhile, Japan has announced a 10 trillion yen (US$65bn) plan to support domestic semiconductor and AI projects.
However, according to Reuters, Industry Minister Yoji Muto, has stated that the government does not plan to raise taxes to finance this initiative, emphasising the country’s commitment to boosting its technology sector without increasing the financial burden on its citizens.
Global semiconductor concerns under President Trump
These developments in South Korea and Japan reflect the broader trend of countries seeking to secure their positions in the global semiconductor supply chain through government support and investment, especially in the face of geopolitical tensions.
Pat emphasises to MIT Management, the importance of technology supply chains: “Geopolitics has been defined by oil over the last 50 years.”
Yet he adds: “Technology supply chains are more important for a digital future than oil for the next 50 years.”
Other countries bracing for impact include Taiwan, which faces potential tariffs on Taiwanese chips proposed by President Trump.
These tariffs could significantly affect global leaders like TSMC, which supplies major clients such as Nvidia and Apple.
Meanwhile, Korean battery companies, which have benefited from US subsidies, are apprehensive about potential changes to the Inflation Reduction Act under President Trump and this could impact their investments in the US.
Finally, Chinese semiconductor firms are preparing for potential further restrictions by increasing purchases of foreign chipmaking equipment and seeking new alliances with countries that may feel alienated by US policies.
Pat muses about the impact the US will have on the semiconductor industry, saying he is confident that the US will “invent” the future. “The question in my mind is, will we manufacture the future?”
