23/11/2023
In any office around the world, with three computers running, at least one of them has a "brain" - a CPU, manufactured in Ho Chi Minh City. This is the result of over 17 years of investment by Intel - the world's first high-tech corporation, choosing Vietnam for a billion-dollar project.
The US chip manufacturer holds about 70% of the global market share for computer CPUs. Meanwhile, the factory in the Ho Chi Minh City High-Tech Park (SHTP) is assembling, testing, and packaging over half of Intel's total chips.
"Calling Intel is an important milestone in the process of attracting FDI," said Mr. Pham Chanh Truc, former Deputy Secretary of the Ho Chi Minh City Party Committee and the first Head of the Management Board of SHTP. Mr. Truc played a key role in the two-year-long negotiations to bring the US semiconductor corporation to Vietnam.
After Intel, many global technology brands such as Samsung and LG have also established billion-dollar factories in Vietnam, along with a series of assembly units for Dell and Apple. From clothing, shoes, to the phrase "made in Vietnam," it has started to appear on TVs, smartphones, smartwatches, and semiconductor chips consumed worldwide.
Nowadays, electrical and electronic devices have become the most important commodity, accounting for nearly half of Vietnam's total export value, reaching $155 billion, a fivefold increase in 10 years. Vietnam has entered the top 10 countries supplying electrical and electronic equipment to the world. However, the billions of dollars invested by these corporations in Vietnam have given the country a new image on the trade map, but they have not yet been able to elevate the economy to a higher value level.
"Vietnam still specializes in assembling basic components and simple processing, while specialized components and equipment have not made any progress" is the conclusion drawn in the first and only Industrial White Paper, published by the Ministry of Industry and Trade in 2019.
That is not the result that the founders of the foundation aimed to achieve in attracting technology investors, such as Mr. Truc.
"High-tech parks or any investors are just the initial core. The ultimate goal must be the spillover effect to drive the development of our own industry," he said.
Clear the way for the "eagle's nest"
After the Đổi mới (Renovation) period, Ho Chi Minh City became the location for the country's first export processing zone - Tan Thuan, established in the southern part of Saigon in 1991. The model was learned from Taiwan, leveraging tax and customs incentives to attract foreign businesses to set up processing and exporting factories. The first investors who came to Tan Thuan were mostly involved in the textile, garment, leather, and footwear industries - sectors representing the early stages of industrialization.
However, both the city's leaders and the central government realized that if they were to integrate late, they needed to find a fast development direction and could not linger in traditional industries.
"We must elevate the export processing zone to access advanced world technologies," recalled Mr. Pham Chanh Truc (then Vice Chairman of the Ho Chi Minh City People's Committee in charge of foreign economic affairs) during a meeting between the city's leaders and Chairman of the State Committee for Cooperation and Investment, Dao Ngoc Xuan.
That was the premise for the establishment of the Ho Chi Minh City High-Tech Park (SHTP). Mr. Truc himself was responsible for researching and implementing this idea in 1992. It took 10 years for SHTP to be officially established, becoming the country's first high-tech park in 2002.
At that time, Mr. Truc was 62 years old, serving as Deputy Head of the Central Economic Commission and preparing for retirement. However, when the Party Committee's leaders proposed that he become the Head of the SHTP Management Board, he immediately agreed, putting his retirement plans on hold.
"This position is only equivalent to a department director, but I didn't compare it to the position and accepted it immediately because I wanted to complete the unfinished project," he recounted.
Mr. Truc discussed with Mr. Xuan that if SHTP could attract an investor from the Fortune 500 list of the largest US companies, it would be a significant boost for Ho Chi Minh City and the whole country.
The first target was HP, as the person in charge of expanding the company's manufacturing operations at that time was a Vietnamese overseas - an advantage for the city. However, this person passed away suddenly, causing the plan to bring HP's investment into SHTP to remain unfinished.
After contacting several other companies, the city was determined to attract Intel when they learned that the largest chip manufacturer in the US was looking for a location to build a new assembly and testing plant in Asia. Vietnam was among the options.
In 2003, Deputy Prime Minister Vu Khoan led a Vietnamese delegation to Intel's headquarters in the US, carrying a letter from Prime Minister Phan Van Khai inviting the corporation to invest and introducing two locations: Hoa Lac High-Tech Park (Hanoi) and SHTP.
In the following years, Intel had sent several delegations to Ho Chi Minh City to explore the conditions of infrastructure, logistics, transportation, human resources, and incentive policies.
"The city has never encountered any investor that has set such detailed and stringent conditions like Intel," Mr. Truc said. As a result, the negotiations had to address "numerous unprecedented requirements" and involved company executives from the United States, leading to late-night meetings.
During a discussion on electricity prices, Mr. Truc directly contacted Deputy Prime Minister Nguyen Tan Dung, who was responsible for overseeing the negotiations at that time, to seek the government's opinion. After receiving the green light, he promptly reached an agreement on incentives with Intel.
"If I had followed the standard procedure of sending written requests to EVN and various ministries, and waiting for the government's conclusion, I wouldn't have known when I could respond. Not all demands can be met immediately by the city, but our commitment made them feel confident," said the former head of the SHTP Committee.
During Prime Minister Phan Van Khai's visit to the United States in 2005, the negotiation delegation even went to Intel's headquarters in California to discuss directly with the company's top executives. However, upon arrival, Mr. Truc was informed that the Chairman of Intel was in Washington D.C.
"We immediately flew to the U.S. capital and invited the Chairman to the Vietnamese Embassy for discussions," Mr. Truc said.
It was during this meeting that the highest-ranking leadership of Intel confirmed their plan to build a $600 million factory in Ho Chi Minh City, with the intention of increasing the investment to $1 billion after obtaining the license a year later.
Three years after the groundbreaking ceremony, Intel began producing the first "made in Vietnam" chips in 2010. At that time, no domestic company had the capability to become a partner of the American corporation.
Today, the factory has over 100 Vietnamese enterprises in its supply chain network, according to Mr. Kim Huat Ooi, Vice President of Manufacturing, Supply Chain, and Operations, and General Director of Intel Products Vietnam.
However, the progress in terms of quantity does not go hand in hand with quality. After 13 years, no Vietnamese company has been able to directly supply materials for the assembly and packaging of chips, such as substrates, capacitors, flux materials, solder, or adhesives. The equipment and machinery in Intel's production line are also not sourced locally.
The playing field for domestic companies remains outside the direct manufacturing line of the semiconductor corporation. It involves indirect inputs such as conveyor belts, furniture, equipment, transportation services, manpower, and security.
In other words, although Vietnam is the birthplace of over half of Intel's products, the domestic manufacturing industry has not been able to provide any essential inputs for the chips. Local businesses are still unable to soar alongside the "eagle."
Samsung is another example that illustrates Vietnam's position in the global value chain. More than half of the smartphones produced by this brand are manufactured in factories located in Bac Ninh and Thai Nguyen.
Annually, the South Korean conglomerate publicly discloses its key suppliers, which account for 80% of the company's procurement value. According to last year's list, 26 major Samsung suppliers are operating in Vietnam. Among them, 22 companies are from South Korea, 2 from Japan, 2 from China, and none are Vietnamese enterprises.
In the global value chain, the forward linkage ratio reflects a country's ability to provide input components to another country's businesses for the production of final products. Conversely, the backward linkage indicates dependence on imported raw materials and components for manufacturing within a country.
Vietnam currently has a much lower forward linkage ratio compared to many other Southeast Asian countries, and it is continuing to decrease. Meanwhile, the backward linkage ratio is gradually increasing, indicating a growing reliance on imports for assembling finished products.
"Foreign direct investment (FDI) corporations find it challenging to establish deep roots in Vietnam due to the fragile linkages with the domestic economy," stated Nguyen Dinh Nam, Chairman of the Board of Directors and CEO of the Vietnam Investment and Cooperation Promotion Corporation. Vietnam's primary role with foreign enterprises remains the provision of labor and low-cost positioning.
Similarly, Phan Huu Thang, former Director of the Foreign Investment Agency, Ministry of Planning and Investment, believes that the FDI attraction policy has long aimed to access and learn core technologies from leading industrial nations. However, after more than three decades, the technology transfer objective has not been achieved effectively, and a significant reason is the lack of linkage between foreign and domestic businesses.
Meanwhile, investors also want to increase localization rates to reduce costs compared to imports, according to Matsumoto Nobuyuki, Chief Representative of the Japan External Trade Organization (JETRO) in Ho Chi Minh City.
Mr. Nobuyuki is frequently asked by many Japanese corporations to connect them with Vietnamese businesses for additional domestic suppliers, especially for critical components. However, he stated, "Very few companies meet the standards of Japanese enterprises."
Around 97% of domestic enterprises are small and medium-sized, with limited capital and management capacity. On the other hand, becoming a supply partner for global manufacturers requires significant technological investment.
"The barriers mentioned above have resulted in most Vietnamese businesses remaining outside the supply chains of high-tech corporations," a group of experts from the Fulbright School of Public Policy and Management highlighted in a 2016 report summarizing Intel's investment in Vietnam.
Therefore, large corporations investing in Vietnam typically bring along their existing supplier networks from foreign countries and then seek to support and train domestic enterprises to participate in the supply chain. However, not every company has the necessary resources.
Earlier this year, a customer of CEO Nguyen Dinh Nam, a German medical equipment manufacturer, announced that they would choose Indonesia instead of Vietnam for their planned factory.
"They searched from the north to the south but could not find chip and circuit suppliers for their devices, so they had to give up, despite acknowledging Vietnam's favorable incentive policies," said Mr. Nam.
Intel is investing billions of dollars in a factory in Vietnam for assembly, testing, and packaging processes. The chip manufacturing and design processes are carried out in another country.
The bottom of the curve
When Intel agreed to invest 17 years ago, some high-level executives raised the issue of persuading the American corporation to expand research and development (R&D) activities in Vietnam. However, Pham Chanh Truc knew that it was almost impossible. "No one easily shares their core technology for fear of being copied," he said.
To date, only Samsung and LG are the two high-tech FDI corporations that have established large-scale R&D centers in Vietnam.
The lifecycle of a technology product begins with R&D, followed by procurement of components, complete assembly, distribution, brand building, sales, and after-sales service. These activities form a parabolic curve from left to right, corresponding to the respective value-added.
This is known as the "smile curve" - a concept introduced by Acer's founder, Stan Shih, in 1992 to describe the value chain. In this curve, assembly lies at the bottom, representing the lowest value-added and is also the stage where most technology corporations' factories in Vietnam are currently engaged.
For example, with a high-end smartphone from Samsung, the assembly and testing process carried out in Vietnam accounts for only 5% of the production cost, according to TechInsights, a technology research company based in Canada, analyzing data from 2020.
"Every country wants to take on high-value-added tasks, but multinational corporations will allocate activities according to the capabilities of each country," said Do Thien Anh Tuan, co-author of the Intel operations research in Vietnam at Fulbright University.
In the chip industry, after the design phase, the production process takes place in two types of factories: fabrication (Fab) and assembly, testing, and packaging (ATM). Intel has 5 fabrication plants in the United States, Ireland, Israel, and 4 packaging plants in Costa Rica, China, Malaysia, and Vietnam.
Kim Huat Ooi stated that the company's plan is to continue focusing on assembly and testing at the facility in Ho Chi Minh City. Vietnam plays a significant role in the company's production process, with the largest output among the ATM factories.
However, Malaysia was the first country outside the United States where Intel chose to deploy its most advanced 3D chip packaging technology. Unlike Vietnam, Malaysia has a complete semiconductor manufacturing ecosystem with domestic enterprises handling all stages from design, fabrication, to chip assembly and testing.
In addition to Malaysia, Singapore also has chip fabrication plants. These two countries, along with Thailand and the Philippines, rank higher than Vietnam in the ECI (Economic Complexity Index), which reflects the ability to produce complex products, as calculated by Harvard University. Despite being one of the fastest-growing countries in the past 20 years, Vietnam ranks 61st out of 133 countries in this index globally, higher than Indonesia, Laos, and Cambodia in Southeast Asia.
Although Vietnam is the most attractive destination for Japanese businesses seeking to implement the "China + 1" strategy to diversify their manufacturing locations outside the world's most populous country, it still only attracts assembly tasks.
"If Vietnam wants to climb higher, it should forget about low-productivity jobs and focus on value-added activities," said Mr. Nobyuki.
This recommendation is not new but has become increasingly urgent as the advantage of labor-intensive activities, which is the main attraction for assembly and processing operations, is diminishing along with the rapid aging of the population in the region. The peak of the golden population era has passed, and Vietnam's labor force will begin to decline in 15 years, according to forecasting models by the United Nations Population Fund.
According to Mr. Do Thien Anh Tuan, the labor productivity of Vietnamese workers is still slow to improve and lags behind other ASEAN countries, while wages continue to rise, making the actual labor costs associated with productivity not cheap. "Investing in human resources and science and technology to move up the value chain must be the top priority," he said.
More than 30 years since the first ideas were outlined for a high-tech industrial park, Mr. Pham Chanh Truc still hasn't seen an advanced manufacturing sector as he had hoped.
"We have a few high-tech companies, but they are still too few. The majority are still engaged in assembly. If we continue at the current pace, how can we achieve the goal of becoming a prosperous country?" Mr. Truc expressed his concerns.
Vocabularies
forward linkage ratio: tỷ lệ liên kết xuôi
backward linkage: liên kết ngược
Source: https://vnexpress.net/dai-bang-o-tro-4679519.html
