Companies Relocating to Vietnam Will Significantly Propel the Semiconductor Market in Vietnam Until 2020, Says Technavio
By Business Wire News
By Business Wire News
According to the latest research report released by Technavio, the semiconductor market in Vietnam is expected to record a CAGR of more than 15% until 2020.
This report titled ‘Semiconductor Market in Vietnam 2016-2020‘, provides an in-depth analysis of the market in terms of revenue and emerging trends. To calculate the market size, the report considers revenue generated from the sales of semiconductors across the following application segments:
- Consumer electronics
- Electronic boards
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“Many large companies are relocating their manufacturing facilities to Vietnam. Intel has decided to relocate the manufacturing facility of its mature products, such as desktop PCs, to Vietnam from Malaysia. Even Samsung is establishing a new USD 3-billion plant in Vietnam. In 2015, LG announced that it would shift its base to Vietnam from Thailand, because Vietnam is gradually becoming a worthwhile country to invest in due to good quality of produced goods and logistical ease,” said Asif Gani, one of Technavio’s lead industry analysts for semiconductor equipment.
“Most of the raw materials are brought from China and assembled in Thailand, and it takes weeks to ship those products, while the China-to-Vietnam route takes less than a week,” added Asif.
Some of the other driving forces behind the growth of the semiconductor market in Vietnam are as follows:
- Low labor cost compared to other countries
- Growth in data center market
- Increase in residential construction
Low labor cost compared to other countries
As the labor cost in Vietnam is cheaper than in other Asian countries, a large number of semiconductor and electronics companies are attracted to set up their bases in the country. The majority of the investments have been made by Intel, Samsung, Microsoft, and LG.
In 2015, Intel decided to relocate its manufacturing facility for motherboards and processors from Kulim in Malaysia to Ho Chi Minh City, Vietnam. In 2013, Samsung shifted its mobile phone manufacturing facilities from China to Vietnam to secure lower wages and defend its profit. Around 50% of the company’s mobile phones are manufactured in Vietnam. In 2014, Microsoft moved its mobile phone manufacturing facilities from China to Vietnam. In 2015, LG opened its production facility in Vietnam to manufacture mobile phones, TVs, air conditioners, washing machines, and car infotainment systems for the domestic and overseas markets. Due to increases in investments and the arrival of new companies, the industrial production of the country grew to 9.8% in 2015.
Growth in data center market
With continuous advances in technology, the amount of data generated on a daily basis is 2.5 quintillion bytes. The data is stored in a facility called a data center. The market for data centers is growing at a rapid pace worldwide, with a CAGR of 10%.
The Southeast Asian countries are considered to have evolving data center markets due to the exponential growth in consumer electronics market and internet penetration. Vietnam is one such market suitable for data centers. The Vietnamese government has identified ICT as one of the key segments contributing to the country’s development and aims to make it an advanced ICT country by 2020. This could be an important driver for setting up data centers in this region. To achieve this target, the government has allocated USD 8.5 billion to develop ICT during 2010-2020. Therefore, many companies have started investing in this country. Intel has invested USD 1 billion in setting up its chip testing and assembly facility in Vietnam. Even Samsung has mobile phones and other electronic manufacturing facilities in Vietnam.
Strong support from Vietnamese government
The Vietnamese government is providing subsidies to companies to make Vietnam an attractive location for foreign companies. In 2012, the Ho Chi Minh City administration initiated a program to develop a chip-making factory at SHTP by the Saigon Industry Corporation for a total investment of USD 314.2 million. In June 2015, the Prime Minister of Vietnam agreed to provide a license to the Saigon Industry Corporation. The project is set for a preferential tax of 10% for a period of 30 years, tax exemption for four years, and a 50% tax reduction for nine years.
Vietnam is also entering into the TPP treaty, which is a landmark 12-nation free-trade deal. This will let Vietnam export its products free of tariffs to other countries. Vietnam is expected to gain the most from this pact, as none of its Southeast rivals have joined it. The pact eliminates 18,000 different taxes on export and import of products among these countries.
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