Vietnam recently announced its national strategy for developing its semiconductor industry. According to a report from the Diplomat, this plan focuses on gradually building local expertise and integrating the country into the assembly, packaging, and testing (APT) stages of the semiconductor value chain, signaling its long-term goal of becoming a leading global semiconductor hub.

According to the report, the success of Vietnam’s plan relies on how the country uses its geo-economic strengths. The report pointed out that there are some significant advantages.

First, Vietnam’s political environment is relatively stable and predictable compared to some of its regional peers, as the report mentioned. The country is not prone to abrupt changes in policy or political instability. According to the report, this stability offers a considerable advantage attracting foreign companies seeking to make long-term investments in Vietnam’s semiconductor and technology sectors.

Second, the report notes that major semiconductor hubs like the U.S. and South Korea are projected to face significant labor shortages by 2030, making Vietnam’s youthful population a key advantage. Planned investments in the talent pool will support Vietnam’s development of its semiconductor industry, encompassing areas such as APT, chip design, prototyping, and fundamental research.

Lastly, according to the report, Vietnam maintains strategically neutral diplomatic relations with key players in the global semiconductor industry, enhancing its appeal as a prominent semiconductor hub. Amid geopolitical risks, Vietnam avoids taking sides with major superpowers, allowing it to engage in business with all parties.

The report highlights that the comprehensive strategic partnerships Vietnam has established provide a foundation for deeper business cooperation, as evidenced by a rising number of deals, including Amkor’s increased investment in its APT plan in Bac Ninh, chip design training from Cadence and Synopsys in Da Nang, and the expansion of Marvell’s design operations.

On the other hand, Vietnam still faces challenges in establishing itself as a significant player in the global semiconductor value chain. First, according to the report, despite its neutral diplomatic strategies, Vietnam is under increasing pressure to choose between competing superpowers, particularly China and the U.S.

Other challenges include the competition with countries that are already in the race and implementing similar strategies. The report indicated that India is a major talent hub, whereas Malaysia and Indonesia are ahead in drawing foreign investment.

Lastly, there are greater demands to comply with sustainability standards in the semiconductor industry, as indicated by the report. As there is growing scrutiny over carbon emissions and water usage, Vietnam is also adapting its existing infrastructure. The country is striving to balance its commitments to U.N. climate change targets while expanding its presence in the global semiconductor industry.

In conclusion, the report highlights that Vietnam has the potential to become a major player in the global semiconductor value chain by leveraging its political stability, demographic advantages, and balanced diplomatic relationships. However, the country must also address challenges such as increasing geopolitical tensions, the need to meet sustainability standards, and the necessity for investments in its workforce and infrastructure.

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As the struggle between China and the United States continues, in order to avoid upcoming geopolitical risks, not only have Taiwanese ODM manufacturers begun to shift some production locations, but market research firm TrendForce has also observed that American OEM companies have started to take action, discussing with partners how to reduce the proportion of Chinese supply chains and components.

TrendForce points out that, at present, American cloud service providers (CSPs) and OEM manufacturers have not yet been able to completely cut ties with Chinese-produced components. Among these, passive components and mechanical assemblies are more difficult to relocate due to factors such as cost and yield. However, other components (such as PCBs and power management control ICs) have plans to move out of China.

But where will these component manufacturers go if they want to move out of China? According to TrendForce’s analysis, PCB manufacturers are currently eyeing shifts to Thailand, Malaysia, Vietnam, and India; power management ICs and control ICs have already moved out of China and relocated to Taiwanese factories; mechanical assemblies and MLCC capacities still mainly come from China, with the former being requested to move but facing challenges due to cost and yield considerations.

TrendForce notes that the aforementioned production line and material shifts are primarily led by American CSPs. The overall server supply chain’s subsequent changes still need to be observed. For example, major players like Google, AWS, and Meta have not only moved most of their L6 production lines to Taiwan but also plan to establish bases in Southeast Asia after 2024 to handle cases within the United States, and reserve flexible production lines along the US-Mexico border, which will significantly increase utilization within this year.

According to TrendForce research, the global high-performance computing market reached approximately US$36.8 billion in 2021, growing 7.1% compared to 2020. The United States is still the largest market for high-performance computing in the world with an approximate 48% share, followed by China and Europe, with a combined share of approximately 35%. Segregated into application markets, high-performance computing is most widely used in scientific research, national defense/government affairs, and commercial applications, with market shares of 15%, 25%, and 50%, respectively. In terms of product type, software (including services) and hardware account for 58% and 42% of the market, respectively.

Since high-performance computing can support data analysis, machine learning (ML), network security, scientific research, etc., it plays a key role in military fields such as nuclear warhead design and missile explosion simulations. Therefore, there are relatively few players occupying key positions in the value chain. Primary suppliers are Fujitsu, HPE, Lenovo, and IBM. These four manufacturers account for a market share of approximately 73.5% globally.

In addition, the continuous development of smart cities, smart transportation, self-driving cars, the metaverse, and space exploration and travel programs launched by Space X, Blue Origin, and Virgin Galactic will increase the demand for high-performance computing focused on R&D and testing along the two major axes of simulation and big data processing and analysis. The global high-performance computing market is expected to reach US$39.7 billion in 2022, with a growth rate of 7.3%. The CAGR (Compound Annual Growth Rate) of the global high-performance computing market from 2022 to 2027 will be 7.4%.

In view of this, the global high-performance computing market is growing steadily but not by much. The reason is that many of the aforementioned commercial application terminals are still in the growth stage, so high-performance computing technologies and solutions adopted by cloud service providers are limited to local deployment This enables HPC servers to scale on-premises or in the cloud and provides dedicated storage systems and software to drive innovation, thereby accelerating the development of hybrid HPC solutions.

In terms of end-use, the high-performance computing market is segmented into BFSI (Banking, Financial Services and Insurance), manufacturing, healthcare, retail, transportation, gaming, entertainment media, education & research, and government & defense. High-performance computing’s highest revenue share was derived from the government and defense market in 2021, primarily due to related agencies actively adopting cutting-edge and advanced IT solutions to improve computing efficiency. At present, government agencies in the United States, China, Japan, South Korea, as well as European countries have successively adopted high-performance computing systems to support digitization projects and contribute to economic development. Therefore, in 2021, the global scale of the on-premise high-performance computing server market was US$14.8 billion, of which Supercomputer, Divisional, Departmental, and Workgroup accounted for 46.6%, 18.9%, 25%, and 9.5% of the market, respectively. The global on-premise high-performance computing server market in 2022 is expected to reach US$16.7 billion with Supercomputer and Divisional growing by 11.5% and 15.2% compared with 2021.

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