_The Global Information and Communications Technology Industry: Where Vietnam Fits in GVCs_ elapsed, these Vietnamese suppliers should be able to continue growing with their anchor customers, and/or sell their products to new lead firms or global suppliers in Vietnam and elsewhere. The Committee for Support Industry Development could then tap these successful local tier 1 suppliers to help develop tier 2 suppliers. For example, Seongji Industrial Co. Ltd, a Koreabased global supplier to Samsung producing touch screens, cables, and PCB assemblies in Vietnam, could support tier 2 supplier development efforts at its client’s behest. This path would involve a global Tier 1 supplier replacing lead firms and platform leaders, working directly with the government to support the development of local tier 2 suppliers. These newly developed tier 2 suppliers could then work to develop tier 3 level suppliers.

# **Promote Semiconducor Design, not Semiconductor Manufacturing**

The Vietnamese government has made clear its desire to develop semiconductor fabrication capabilities. It is set to invest $300 million in a wafer fab in Saigon Hi-Tech Park. Output is expected to reach 400 million chips a year, and annual revenues are expected to reach $120 million. We believe that the focus on developing semiconductor fabrication (i.e., of silicon wafers) is misguided. While it is true that Vietnam is forced to import most of its semiconductor devices, the finance and technology required to build a leading-edge fab is prohibitive, upwards to US$2-5 billion, with costs for large plants topping $10 billion, with capital depreciation running 50-80% of manufacturing costs. Moreover, the profit margins on semiconductor production can be low, because of intense competition, short product life cycles, and regular periods of excess capacity due to market instability (Brown and Linden, 2009). Efforts to compete in the semiconductor industry should focus instead on chip design. There are a number of design houses currently active in Vietnam. The ten largest comprise 90 percent of the Vietnamese market (See Table 10). Only Intel is engaged in manufacturing, and this is in the low value added function of “chip assembly” where semiconductor chips are fabricated elsewhere, and placed in their final package. Chip design, on the other hand, can be profitable, and is often a critical portion of final product functionality and design.

**Table 10: Top Semiconductor Firms in Vietnam**

|**Rank**|**Company name**|**Location **|**Core Competences**|
|---|---|---|---|
|1|Intel|Ho Chi MinhCity|Assembly and packaging|
|2|Renesas|Ho Chi MinhCity|ASIC digital IC design(Front-End)|
|3|Acrosemi|Ho Chi MinhCity|ASIC digital IC design(Front-End)|
|4|E-Silicon|Ho Chi MinhCity &DaNang|ASIC digital IC design(Back-End)|
|5|SplendidTechnology|Ho Chi MinhCity|RFIDdesign& solutions|
|6|SignetDesignSolutions|Ho Chi MinhCity|ASIC digital IC design(Back-End)|
|7|Dolphin Technology|Hanoi|Siliconproven IPdesign|
|8|Active-Semi Vietnam|Hanoi|Power management chip design|
|9|VietVmicro|Ho Chi MinhCity|AnalogIC design|
|10|VSMC|Ho Chi MinhCity|Power management chip design|

_Source_ : Trinh and Demidenko 2013 Following the Government’s announcement that it would make a push for local semiconductor fabrication, many universities around the country began to offer chip design courses. More than 15 institutions including the RMIT, the Saigon Institute of Technology, the Ho Chi Minh University of Science and the Hanoi University of Technology now offer integrated chip design courses that use global electronic design automation (EDA) software tools developed by global vendors like Synopsys, Cadence and Mentor Graphics. We believe that efforts to develop local semiconductor fabrication capabilities should begin and end with the $300 million fab under development. This would give students learning IC design the opportunity to test their products before sending them to global companies for full-scale production. However, efforts to develop a large, commercial fab should not be pursued given difficulties related to high capital costs, rapid technological change in fabrication processes that speeds depreciation, and the consolidated and 29