The overall picture of foreign direct investment (FDI) in Vietnam in 2023 was not drawn from figures about the number of projects, pledges, and disbursements but rather the positive trend in the movement of this important investment flow.
Member companies of the US Semiconductor Industry Association (SIA) had a busy year in Vietnam with plenty of activities to implement tasks related to cooperation on developing the semiconductor industry — a key content of the joint statement on elevating Vietnam-US relations to a comprehensive strategic partnership.
SIA President John Neuffer visited Vietnam three times in 2023 to promote cooperation between SIA members and Vietnamese partners and create opportunities to expand the market as well as enhance Vietnam’s capacity in this new industry. He said SIA members such as Intel, Marvell, Synopsys, Qualcomm, Ampere, and Infineon have made substantial investments in Vietnam and are working to double their investments. Neuffer noted that these investments are evidence of Vietnam’s key and growing role in the semiconductor supply chains, adding that investors also recognise remarkable opportunities for Vietnam to have its own mark in the global semiconductor supply chain.
According to Jensen Huang, Chairman and CEO of the US chipmaker Nvidia, Vietnam left many good impressions during his first visit to the country in December 2023. After meeting with Prime Minister Pham Minh Chinh and attended a workshop on the development trends of the semiconductor industry and artificial intelligence and the opportunities for Vietnam hosted by the Ministry of Planning and Investment (MPI) at the National Innovation Centre, the Nvidia CEO shared that he felt welcomed in Vietnam and pledged to soon establish a legal entity in Vietnam to turn the country into Nvidia’s second homeland. He expressed his wish that the Minister of Planning and Investment could specify a partner for Nvidia to cooperate with and gradually realise the dream of building a new Vietnam. Nvidia is the partner of many large enterprises in Vietnam, such as Viettel, FPT and Vingroup, with annual revenue estimated at 500 million USD.
Amid falling global investment flows and fierce competition between countries in the region and the world, in order to attract this important resource, Vietnam still emerges as an attractive investment destination. Investor confidence in Vietnam continues to be strengthened as investors still regard Vietnam as an attractive destination with plenty of potential and opportunities in the medium and long run. Notably, Vietnam’s position in the electronics supply chain has been increasingly cemented, opening new cooperation trends with many renowned electronics corporations in the world.
Assembling electronic products at Stronics Vietnam at Dinh Tram Industrial Park in Bac Giang Province. (Photo: Tran Hai)
Enhancing Vietnamese enterprises
Vice Chairman of the Vietnam Association of Foreign-Invested Enterprises (VAFIE) Nguyen Van Toan stated that Vietnam is facing a turning point with big opportunities to increase the quality of FDI flow. He analysed that Vietnam also had a chance for a boom in FDI in 2008 thanks to the positive impact from its accession to the World Trade Organisation. FDI pledges to Vietnam surged at that time, along with strong growth in international trade, but disbursements were not commensurate because Vietnam was not adequately prepared to receive such investment flow. A new opportunity presented itself again in 2023 and subsequent years thanks to a big advance in Vietnam’s diplomatic relations with major partners such as China, the United States, and the European Union.
To avoid missing the opportunity, Vietnam needs to be adequately prepared. The situation is different now as tax incentives and cheap labour are no longer advantages in attracting FDI because many countries, including Vietnam, have announced the imposition of a global minimum corporate tax starting from 2024.
Implementing traditional measures such as simplifying market access procedures, building infrastructure and preparing cleared land is necessary, but to receive high-quality investment flow, Vietnam needs to have a high-quality workforce to meet the development requirements of new industries and establish domestic enterprises capable of taking part in the global supply chain.
Toan said that enhancing competitiveness such that domestic enterprises have the confidence to participate in the supply chains of FDI enterprises is an urgent task. He noted that developing supporting industries should be not interpreted simply as making small and medium enterprises take part in supply chains but should also include providing assistance for large Vietnamese companies such as FPT and Vingroup to join global supply chains in leadership positions with their own brands.
The FDI wave comes with it a large source of capital, which plays an important role in taking Vietnam to join the global supply chain and enhance its production capacity. But Vietnam not only builds nests to welcome the eagles (a metaphor for big companies) but has also sets the goal of flying with them to pull the economy higher on the value ladder. To realise this aspiration, Vietnam has introduced concrete and consistent orientations, goals, and actions to lay the initial important foundation for new industries, high-tech industries, and the semiconductor industry. Vietnam is rated as a country with a dynamic innovation ecosystem thanks to the rapid development of the digital economy and the strong growth of advanced technology.
According to foreign investors, Vietnam has increasingly affirmed its role as the new centre of economic growth in Asia with a firm position in the global supply chain, receiving continuous investment from multinational corporations.