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Economy

Vietnam courts chip investment to power up digital economy

Communist Party aims to grow tech sector to 30% of GDP in a decade

A Samsung smartphone plant in Bac Ninh Province in northern Vietnam. The South Korean company operates two huge smartphone factories in the Southeast Asian country. (Photo by Tomoya Onishi)

HANOI -- Vietnam is moving to build a bigger digital economy, driven in part by semiconductor manufacturing, during the next five years and beyond as the Communist Party this week maps out a course that will take the country's economy to 2045.

Prime Minister Nguyen Xuan Phuc, who guides economic policy, this week signed documents to encourage technological innovation and more digital players.

The documents set a target of increasing the "digital economy" contribution to gross domestic product to about 20% by 2025. By 2030, the figure is expected to reach 30% of GDP. Making a shift to high-quality and value-added products is to play a major role in achieving the targets.

The documents are in line with the country's main economic goals set to be approved at the political gathering: emerge from the current lower-middle-income economy by 2025 and gain developed nation status by 2045 when Hanoi will mark the 100th anniversary of the establishment of the Democratic Republic of Vietnam, now the Socialist Republic of Vietnam.

The party's National Congress, held about once every five years, is set to wrap up Tuesday.

Prime minister Phuc has been keen to bolster the country's chipmaking industry as companies begin to diversify supply chains out of China. His move to court the semiconductor industry has started to pay off.

On Tuesday, the industrial zone and high-tech park authority in Danang said it granted an investment license for a semiconductor project worth $110 million by Silicon Valley-based Hayward Quartz Technology. The plant will specialize in the production of semiconductor materials, according to local reports. U.S. chip giant Intel also said this week it injected $475 million into its Vietnam division engaged in assembly and testing.

Investments by U.S. companies followed Phuc's move in October. The prime minister asked Samsung Electronics Vice Chairman Lee Jae-yong to invest in a semiconductor manufacturing plant in Vietnam, when the de facto leader of the South Korean tech giant visited Hanoi.

Whether Vietnam secures Samsung's investment in semiconductor manufacturing remains to be seen. Lee told the prime minister he would visit Samsung's complex in Ho Chi Minh City to consider an expansion plan, radio broadcaster Voice of Vietnam reported.

Meanwhile, news site Businesskorea reported Samsung's current priority is to complete the construction of a research and development center that will employ 3,000 in Vietnam by 2022 rather than complying with the investment request from Phuc.

Samsung is the largest foreign investor in Vietnam, with investments totaling $17 billion, according to Vietnam's government website. Vietnam exported smartphones and parts worth $51.38 billion in 2019, mostly produced by Samsung Electronics.

Vietnam's efficient handling of the pandemic has raised the country's brand as the top destination for diversifying beyond or away from China. That could further propel the country to rise as a regional hub of tech manufacturing.

"But two factors limit Vietnam's ability to absorb significantly more manufacturing from China and move up the value chain: its high dependence on foreign input for production and its much smaller population size," Trinh Nguyen, a nonresident scholar at the Carnegie Endowment for International Peace points out. Building a cluster of domestic chip industry is a potential move for Vietnam to climb up the value chain.

Hanoi's digital economy strategy comprises a range of elements including digitization of government, deployment of a digital payment system and ultrafast fifth-generation telecom network. Vietnam will be "taking full advantage of the achievements of the 4th Industrial Revolution," documents of the national strategy say.

The 4th Industrial Revolution refers to the ongoing automation of traditional manufacturing using technology including 3D printing, artificial intelligence and machine-to-machine communication.

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