Amid global supply chain restructuring and geopolitical tensions, what has made Vietnam a favored destination for major technology corporations recently?

Diversifying supply chains to minimize risks A recent decision by Nvidia, the world’s largest chip manufacturer, to establish an Artificial Intelligence Research and Development Center and an AI Data Center in Vietnam has become a focal point since early December 2024. Vietnam is the third location where Nvidia has invested in AI R&D centers, following the United States, where Nvidia is headquartered, and Taiwan, the homeland of Nvidia’s CEO Jensen Huang. In early November 2024, several international media outlets reported that American tech billionaire Elon Musk had requested suppliers of components for Starlink satellite internet devices to shift their production from Taiwan to Vietnam. In September 2024, a senior vice president of SpaceX — a leading global company in spacecraft, satellite launch, and satellite communication services, also founded by Elon Musk — announced plans to invest US$1.5 billion in Vietnam in the near future. According to analysts, after decades of concentrating production in mainland China and Taiwan, major electronics assemblers like Foxconn, Wistron, TSMC, and United Microelectronics Corporation (UMC) are gradually expanding their operations to Southeast Asia, Japan, and even Europe. Beyond the effects of the U.S.-China trade war in recent years and stringent bans on Chinese tech companies, geopolitical risks are increasingly contributing to this diversification by these corporations. Military conflicts such as the ongoing Russia-Ukraine war, escalating Israel-Iran tensions, Bashar al-Assad’s regime fall in Syria, and the potential for the Taiwan Strait to become the next geopolitical hotspot are driving these shifts. Wistron NeWeb Corporation (WNC), a Taiwanese company supplying networking equipment for Starlink that recently relocated production to Vietnam, acknowledged: “Due to geopolitical risks and fast-changing customer demands, we are expanding our global production capacity.” Amid this context, Vietnam is emerging as a safe and promising investment destination for multinational tech corporations. Prior to Nvidia, many large technology firms had increased their investments in Vietnam, not only in manufacturing plants but also in R&D. In recent years, Vietnam has implemented policies to attract foreign investment, focusing on segments with higher value chains. For instance, at the end of 2022, Samsung inaugurated its new R&D center in Hanoi, which is the largest of its kind in Southeast Asia. Infineon Technologies, Germany’s largest semiconductor producer, established an R&D center in Vietnam in May 2023, specializing in testing and customizing digital circuits. Other companies such as Bosch Vietnam, LG, Panasonic, and Renesas Electronics — a Japanese semiconductor manufacturer — also have R&D centers in Vietnam. Vietnam’s advantages First and foremost is Vietnam’s strategically important geographical location, situated in the heart of Southeast Asia. This makes it ideal for regional market connectivity and expansion, while also being close to major East Asian economies such as Japan, South Korea, and China. This proximity allows technology corporations to easily access and distribute their products and services to neighboring countries. Additionally, Vietnam is one of the few countries with favorable conditions for maritime and waterway transport, thanks to its long coastline and numerous deep-water ports, which facilitate logistics and shipping operations. Diplomatically, Vietnam’s standing on the international stage and within the region has been increasingly elevated. The country’s efforts to upgrade relations to strategic partnerships with numerous major economies in recent years, coupled with its proactive signing of new-generation free trade agreements (FTAs), have expanded export markets and created favorable conditions for technology corporations to grow internationally. These agreements give Vietnam access to 60 countries, including 15 out of the G20 nations, while helping it avoid risks from trade wars between major powers. Domestically, Vietnam maintains a stable political environment, along with sustained economic growth over the years, which has instilled confidence in long-term investors. Particularly in the past five years, Vietnam has attracted a significant number of foreign direct investment (FDI) projects in high-tech industries, aided by a range of appealing investment incentives such as corporate income tax exemptions and reductions, land use support, and infrastructure assistance. Among these, investment projects in the semiconductor industry—a high-tech field—enjoy the highest incentives allowed under Vietnamese law. Attracting investment from major technology corporations is one of the three breakthroughs identified in the Party’s resolution at the start of the 13th National Congress term. As a result, Vietnam has focused on developing technology infrastructure and high-tech zones such as the Hoa Lac High-Tech Park, Danang High-Tech Park, and particularly the Saigon Hi-Tech Park in Ho Chi Minh City, which provide a conductive environment for tech enterprises to operate and grow, creating a vibrant tech ecosystem. Moreover, Vietnam’s young, dynamic workforce, capable of adapting to technological innovation, serves as both a potential market for tech products and a robust source of talent for high-tech industries. The Government is also implementing training programs in order to supply 50,000 high-quality workers for the semiconductor industry by 2030. Notably, for foreign technology corporations, Vietnam’s local culture is flexible and easily integrates with international business practices. Finally, industries like semiconductors, which require high-tech equipment operating at significant energy levels, lead to substantial energy consumption. Maintaining a clean production environment and controlling temperatures in clean rooms also demand considerable energy. Ventilation, air filtration, and air-conditioning systems must operate continuously to ensure product quality, further increasing energy demand. To mitigate environmental impact and energy costs, many companies in this sector are turning to renewable energy and improving energy efficiency in production processes. This not only reduces costs but also meets sustainability requirements. Vietnam has recently made specific commitments to sustainable development and green technology, with favorable conditions for renewable energy development, such as wind and solar power. As a result, the country is increasingly meeting the stringent demands of global technology corporations.