Vietnam - an exception in terms of FDI attraction

Vietnam - an exception in terms of FDI attraction

The Vietnam Association of Foreign-Invested Enterprises (VAFIE) released its annual report on foreign direct investment (FDI) for 2024 on April 16, affirming the potential Vietnam has to become a semiconductor manufacturing hub.

15 Asian economies that had attracted the most FDI by 2024. Source: Seasia Stats

Nguyen Mai, VAFIE's chairman, said that Vietnam is considered a successful model in attracting FDI thanks to its increasingly improved institutions and investment environment, stable political foundation, and high economic growth potential. However, the goal of green growth is a difficult goal, while the number of large corporations investing in the country is low. Foreign-invested enterprises are also facing difficulties moving towards green growth.

To solve these difficulties, relevant authorities need to accelerate the completion of regulations on green enterprises, green credit finance, and green investment for green development. On the business side, domestic enterprises need to adapt to production and investment in a green direction. Foreign enterprises should support domestic enterprises to change the way they approach and foster human resources to meet green economy standards.

According to HSBC's Global Research Department, Vietnam, along with Singapore and Malaysia, excels in ASEAN in attracting FDI to the technology sector. Many technology corporations have made a mark in Vietnam. According to HSBC, half of Samsung's smartphone production globally comes from Vietnam. This has also encouraged other tech giants, especially Apple, to expand their operations.

Apple Corporation from the United States has completed the transfer of 11 factories producing audiovisual equipment to Vietnam. The trio of Apple's partners in Vietnam, Foxconn, Luxshare, and Goertek, have also increased their investments and expanded their factories in the country.

The American Semiconductor Industry Association and many businesses have come to Vietnam to learn about the investment environment as a location for chip production. According to economic experts, with the cooperation of US technology enterprises, Vietnam is capable of exploiting and producing semiconductors on a larger scale.

Recent US policies, such as friend-shoring (shifting US production to friendly partners), have recognised Vietnam as playing an important role in this policy. Currently, resources for this policy are being supplemented by the US, and a significant amount of money from the Chip Act will support Vietnamese partners in the semiconductor industry.

In 2024, Vietnam attracted multiple foreign-invested semiconductor projects, which is a positive sign for 2025 as the country seeks to attract FDI at a higher, cleaner, and greener level. LG Display increased its investment capital by $1 billion, bringing its total in Haiphong to $5.65 billion. Samsung also announced plans to invest an additional $1.8 billion in the Samsung Display Factory in Bac Ninh province.

Heesung from South Korea increased its capital from $154 million to $279 million last year, while Son Technology Vietnam Co., Ltd., a member of Foxconn Group, announced a plan to invest $80 million in an integrated IC manufacturing plant in Bac Giang. Universal Microwave Technology, a component supplier for Spacex – Elon Musk's company, is planning to increase its investment in Vietnam.

"Vietnam is becoming an investment hotspot for the semiconductor industry, attracting capital and great attention from international businesses. The development and potential of the semiconductor industry have a direct impact on industrial real estate, thanks to the increase in demand for factories to meet infrastructure and service requirements," Mai emphasised.

Vietnam is also issuing policies to draw foreign investment and businesses to the semiconductor industry.

The report said that along with the development of the electronics assembly and manufacturing industry chain, incomes are improving. Digital transformation is being strongly promoted, prompting demand for smart electronic devices to increase rapidly. This opens up the potential for Vietnam to become an attractive market for the growth of the semiconductor industry.

In addition, digital transformation, the expansion of the Internet of Things in smart cities, industrial automation, agriculture, and healthcare are driving the demand for semiconductor components such as microcontrollers, sensors, and connected chips.

"As Vietnam continues to increase the application of advanced technologies in multiple fields, the demand for semiconductor solutions is forecast to grow exponentially, creating a vibrant and promising semiconductor market," the report noted.

VIR