Singapore

SEMI Southeast Asia continues to implement workforce development initiatives to strengthen the region's position as a global manufacturing hub. SEMI launched the global SEMI University online learning management system in February.

Guido D’hert, High Tech and Semiconductor Industry Europe Lead at Accenture, spoke about challenges semiconductor companies face in meeting sustainability goals and how to apply analytics, new green technologies and circular design, sharing during his presentation at ISS Europe in Brussels, Belgium.

As part of bi-weekly meetings of the SEMI Environment, Health, Safety and Sustainability (EHSS) community to share information on the impacts of the pandemic, the EHSS COVID-19 Working Group recently revealed that companies are offering PTO to employees to get vaccinated.

AEM Holdings Ltd, a Singapore-based multinational corporation, is listed in Forbes Asia’s 200 Best Under A Billion 2019 and 2020 spotlighting small and midsized companies in the Asia-Pacific region with sales under $1 billion. AEM clinched the Singapore Business Review Technology Excellence Award 2020 for Analytics-Semiconductor and the Singapore Business Awards Enterprise Award 2019/2020. These achievements are testament to AEM’s vision and innovation and the company’s contributions to the increasingly complex testing of chips in a rapidly evolving technological world. I spoke with AEM CEO Chandran Nair, a new Regional Advisory Board (RAB) member of SEMI Southeast Asia, about the company’s intelligent test and handling solutions, its role in digital transformation, the company’s key role in the smart manufacturing movement and the growth prospects for Singapore’s electronics sector. SEMI: AEM’s application-specific, intelligent system test and handling solutions for semiconductor and electronics companies serve the advanced computing, 5G and AI markets. How do you differentiate your solutions from those offered by competitors? Nair: A key differentiation for AEM is that we work closely with our customers to develop application-specific integrated test and handling solutions that meet their needs in a scalable manner from lab to production. We offer our customers customized, full-stack test and handling solutions that give them the agility to accelerate their delivery cycles and enhance product quality. Over the years, AEM has developed and acquired world-class technologies in instrumentation, test, automation, robotics, optical inspection, high-end thermal control, and software. These technology pillars, along with our deep know-how to customize test and handling solutions using the technology pillars as a platform, enable AEM to meet the fast-changing needs of our customers faced with the challenges of testing heterogeneous and complex devices. In addition to investing in technology, AEM has also invested in delivering application-specific solutions to meet customer demand. Our recently announced acquisition of CEI with its manufacturing capabilities in Vietnam and its specialization in low-volume, high-mix manufacturing increases our geographical reach and our ability to quickly turn application-specific test and handling solutions to be deployed. We have a unique and differentiated approach that enables our customers to test high-performance computing devices, automotive devices, and mobility devices with maximum test coverage, cost-effectively, in a manufacturing environment. Our experience in serving the high-performance computing market that traditionally drives advancements in thermal control also puts us at the forefront of delivering comprehensive thermal management, vision, and deep automation and test solutions for the computing, automotive, and mobility markets. AEM also has a strong instrumentation portfolio, including high-density digital instruments and mixed-signal and protocol-aware instrumentation that is well-suited for ATE solutions for SoC, high-power devices, and CMOS image sensors. Over the last few years, we have also established leadership positions in developing and deploying application-specific test solutions for MEMS devices and offering wafer and frame probing stations suitable for R D, wafer sort, and final test. We form strong partnerships with our customers, provide them with end-to-end support in product development, and take them through the entire life cycle process from concept to mass production. Chandran Nair and Goh Meng Klang, vice president of operations, at the AEM manufacturing site in Singapore. (Photo credit: AEM) SEMI: Digital transformation is powering strong growth of advanced computing, 5G and AI. Will AEM be expanding its AEM manufacturing plants in China, Malaysia and Singapore to meet rising demand for these technologies in the coming years? Nair: In regards to manufacturing, AEM currently has manufacturing facilities in Singapore, Malaysia, the U.S., Finland, and China. With our recently announced acquisition of CEI, we will add manufacturing capability in Vietnam and Indonesia. AEM will continue to expand manufacturing appropriately to give our customers cost-effective solutions while maintaining our proven track record of delivering on time and scaling rapidly in times of crises like the pandemic or geopolitical disruptions. As for advanced technologies, the three key factors that will bring the full potential of 5G to fruition are 1) cost-effective, high-powered processing devices at the edge, 2) easy access to high-bandwidth communications, and 3) cost-effective sensor technology. Semiconductors are the primary drivers of these three key success factors. As devices become more complex and our reliance on semiconductor-powered devices in all aspects of our lives deepens exponentially to include mission-critical applications, AEM’s role is to ensure that our customers' electronic and semiconductor devices are shipped thoroughly tested, safe to use, and highly reliable. It is imperative that, as a testing company, we find innovative ways to help our customers test their products with maximum coverage and minimum cost. To do this, we are focusing our R D efforts and investments to continue building on our key technology pillars to ensure that we stay ahead of the curve when it comes to test and handling solutions. We prepare our customers to test increasingly complex devices manufactured on the latest process node. SEMI: During your career you’ve driven projects in test and automation and more recently robotics solutions for ports, logistics warehouses and transport. With robotics and automation a key part of Industry 4.0, what role do AEM solutions play in powering the smart manufacturing movement? Nair: The smart manufacturing movement is powered by semiconductors, software and increasingly by artificial intelligence (AI). Test is at the heart of the process of ensuring that semiconductor and electronics devices reach the consumer well-tested for reliability. With our vision of enabling A Zero Failure World, AEM addresses the necessity for safe, highly reliable devices. The semiconductor companies themselves are adopting smart manufacturing methods. AEM’s tools are Industry 4.0-ready, and we continue to invest in machine learning and data analytics, which are integral to the future of test. Our tools are automated and feature embedded sensors to provide our customers with data about tool usage, the state of a machine’s health, and more. Our tools are connected to our customers’ manufacturing automation platforms. Additionally, we continue to invest in our ability to better slice and dice test data to understand trends and patterns to help our customers analyze data and make decisions faster. SEMI: You also have experience heading autonomous vehicle projects. With the COVID-19 pandemic hastening digital transformation, do you see an acceleration in the development of fully autonomous vehicles and smart manufacturing? Research and development efforts for autonomous vehicles (AV) continue at a fast pace worldwide. With shutdowns and restricted movement rules globally, the pandemic has hastened digital transformation in many ways. The delivery of goods and services is transforming, and AV will surely play a part, especially in secure environments for autonomous transport. The pandemic has accelerated the development of autonomous vehicles and smart manufacturing technology in automation-friendly environments like factories and ports. SEMI: At the recent Global Technology Summit hosted by SEMI, you spoke about testing innovations to meet the demands of highly complex devices. Please elaborate on innovative testing solutions versus traditional testing? Nair: AEM offers a disruptive and differentiated solution, one that is driving a paradigm shift to asynchronous, modular, highly parallel, smart testing solutions. ​ The traditional approach of ATEs to test increasingly complex devices on advanced nodes has reached a point of diminishing returns as it gets exponentially more expensive to increase test coverage to acceptable levels. Additionally, as devices get more complex and companies are rapidly adopting heterogeneous packaging technologies, the realization that System Level Test (SLT) is necessary is forcing a rethink of the entire test process. AEM’s provides asynchronous, modular, highly parallel test cell solutions that enable each test cell to run SLT, final test, or burn-in all in one system and its ability to handle hundreds of test cells independently with each test cell testing multiple devices. Our solutions suddenly make comprehensive testing of every complex device cost-effective. Freeing us from legacy ATE allows AEM to provide these innovative solutions to our customers. AEM engineering and manufacturing teams in Singapore at work on semiconductor test and handling systems for global deployment at world-class semiconductor facilities. (Photo credit: AEM) SEMI: Singapore seems to be in the sweet spot of digital transformation. Singapore’s industrial production grew 8.6% year-over-year in January 2021, an expansion driven mainly by a surge in sectors including electronics, and more growth is seen in the year ahead. Digital technologies such as 5G technology and cloud computing together with continued demand for work-from-home equipment is behind this growth. What are the growth prospects for the region’s electronics sector? Nair: Singapore is well-poised to benefit from the current digital transformation accelerated by the adoption of these technologies during the pandemic. Being a safe, well-governed country with strong IP protection, excellent infrastructure, and the rule of law, Singapore is in a great position to play a central role in cloud-based services, 5G, and the semiconductor industry. Singapore’s semiconductor sector output is at a record high, and the prospects for renewed growth in the region are very good. SEMI: As a new Regional Advisory Board member of SEMI Southeast Asia, how is your industry experience relevant to the scope of this role? What opportunities lie ahead for the region? Nair: I am honored to represent AEM in the SEMI’s Southeast Asia RAB. The SEMI RAB can influence policymakers with ideas and information on the current and future needs of the industry. I also believe that SEMI Southeast Asia can cultivate a strong innovative semiconductor ecosystem that helps regional and global growth. I look forward to working with other very experienced and accomplished board members. Bee Bee Ng is president of SEMI Southeast Asia.

The state of manufacturing is changing rapidly. Regardless of sector or location, manufacturing decision-makers across the world are signaling a desire for better supply chain resiliency, manufacturing flexibility, increased speed of innovation and stronger environmental sustainability. Singapore’s manufacturing sector, a significant contributor to its gross domestic product, is always evolving and today is shifting away from its traditional focus on producing highly customized products using flexible manufacturing processes, but at significantly lower efficiencies. Today, with Industry 4.0, we can design manufacturing systems that optimize both efficiency and flexibility. And this is possible because of the convergence of technologies such as artificial intelligence (AI), data analytics, robotics and the Industrial Internet of Things (IIoT). This blend of technologies helps reduce the cost of technological solution ownership – a derivative of Right’s Law – as a function of cumulative production. In HP Singapore, driving innovation in our product and processes is part of our DNA, and over time our products have grown in complexity and breadth. We have embraced Fourth Industrial Revolution (4IR) technologies in our advanced manufacturing lines. We started our Industry 4.0 journey in 2016 with Vision and Mission 2020 to modernize our production facilities to smart factories that strengthen our competitive edge. Our focus was on upskilling our employees with future skill sets, build new technological capabilities and partner with higher education institutes. To drive these transformations, we have formulated five pillars: Additive Manufacturing Data Analytics Cyber-Physical Integration Digitalization Workforce Transformation These five pillars have enabled us to move from labor-intensive and reactive processes to processes that are highly digitized, automated, and AI-driven, enabling us not only to increase quality and productivity but also to reskill our people in anticipation of jobs they will need in the future. Technicians have been upskilled and promoted to techno-operators which has, in turn, freed up technical specialists to explore other roles. Engineers have retrained as data scientists, or have moved to new product development, for instance. In 2017, HP’s Ink Supplies Operations (ISO) set up Smart Manufacturing Applications and Research Centre (SMARC) to adopt 4IR technologies and implement these innovations in production lines. Today, SMARC is the home ground for HP engineers to experience, trial and prototype solutions, bringing innovative and sometimes unexpected solutions to manufacturing. It is also a showcase for industry partners, government agencies and schools. Here is how each pillar of the SMARC contributed to transformation to augment the manufacturing workforce: Cyber-Physical Integration – Move Role of robotics/automation – By standardizing automation standards for robotics, we have deployed collaborative robots (Cobots) and autonomous intelligent vehicles (AIVs) to perform manual and routine tasks to drive productivity, while reducing errors from operator fatigue and protecting our operators’ physical well-being. Digitalization – Sense Role of IIoT – Devices are a treasure trove of data that can provide clarity on how the entire manufacturing line is performing in real time. Building a platform that connects devices and collects data while allowing factory floor managers to dynamically visualize on an Integrated Command Centre (ICC) and manage factory performance is central to HP’s digital transformation journey. And IIoT is not restricted to just devices that are already wired for data sharing. HP has also connected off-the-shelf analogue devices using a standardized data transportation protocol, allowing HP to collect essential data across all types of devices and eliminating manual data entry. Additive Manufacturing – Build By embracing additive manufacturing (use of HP MultiJet Fusion 3D printers), HP introduced more flexibility in operations through on-site rapid prototyping, light production, and replacement of parts needed on our manufacturing floors, shortening production timelines. We 3D printed pallets, which are cheaper and faster to produce, and replaced original pallets for transportation on conveyor belts, improving the efficiency and productivity of our operators. Director Jamie Neo with HP’s MultiJet Additive Manufacturing Printer. (Photo Credit: HP) The HP Multi Jet Fusion 3D printing technology has helped HP to replace traditional manufacturing methods and streamline processes in our supply chain. For example, HP is 3D printing the Drill Extraction Shoe, a tool that is essential to the removal of waste products from laser-drilling in HP’s printhead manufacturing line. Through 3D printing, HP has consolidated the production of the tool from nine parts to one 3D printed model, thereby optimizing the design of the tool and reducing its production time from three to five days to 24 hours. Data Analytics – Think By deploying advanced analytics and machine learning models, HP has enabled real-time detection, diagnostics, and prediction of product quality across our manufacturing lines. Predictive models are replacing traditional “destructive testing,” reducing waste and allowing HP to meet unique product specifications more accurately. Machine learning is diagnosing and recommending the right set up for tools and manufacturing lines, when necessary, to reduce downtime and increase precision. Workforce Transformation – Grow The pivot to becoming an advanced manufacturing leader not only requires HP to invest in 4IR technologies but also skill sets to operate 4IR technologies. We embarked on a Workforce Transformation program to help our employees stay competitive in a fast-changing world. Today 35% of HP technical workforce have had the opportunity to take on new roles even as needs evolve, thanks to internal and external training and reskilling. Beyond technology and training, the glue that binds these together and makes it successful is our culture at HP. We are ambition-led, which means that we do not see the world as it is, but what we can be. And we do so by collaboration. Plans for the Future After accomplishing our Mission 2020, in late 2020 we launched Mission 2025 to extend our end-to-end smart factory capabilities through advanced connectivity, intelligence and automation to optimize and drive sustainable manufacturing flexibility and efficiency. Pyramid of HP’s smart manufacturing focus Advanced technologies such as additive manufacturing, IIoT, automation and robotics, data analytics, machine learning and AI are central to the connectivity and the end-to-end intelligence of our smart factories, enhancing production efficiency and flexibility while improving the quality of our products. For example, the deployment of IIoT sensors in our wafer plant has helped to reduce downtime in replacing CO2 gas cylinders. What’s more, AI enables us to more accurately monitor the dispensing of structural adhesive to eliminate lost yield. We believe that by enhancing manufacturing efficiency and flexibility, we were able to shorten resolution time, reduce our carbon footprint, and improve the resiliency of our manufacturing and supply chain systems. HP smart factory model In April 2021, two lines in HP Singapore joined the World Economic Forum’s Global Lighthouse Network after being recognized for pivoting from a labor-intensive factory into a digitized, automated one with the help of AI. In doing so, we managed to improve manufacturing costs by 20% and productivity by 70%. Under Mission 2020, we saw the following successes: Improved manufacturing costs by 20% Improved productivity by 70% Brought most HP employees onboard to our smart manufacturing journey Equipped HP employees with skill sets in areas such as additive manufacturing, data analytics, AI, robotics and Internet of Things Established a Model Factory playbook With Mission 2025, we will: Continue to train employees in future skillsets by partnering with institutes of higher learning Scale our Model Factory playbook across more manufacturing lines to reduce costs and improve productivity Enhance our knowledge in additive manufacturing by building an ecosystem as a service platform to help manufacturing companies Enable a sustainable manufacturing system to reduce our carbon footprint and help enable a circular economy We believe in innovating with purpose by focusing on solving real-world problems and creating technology in the service of humanity. That is why we built the SMARC to create the solutions for our lines and showcase these solutions to encourage industry participation. We are driven by values and ambition, which means that it is not just what we do, but also how we execute it. We make sure our values inform everything we do – for instance, helping us make a greater impact to environmental sustainability, people, and our community. We believe this is a crucial step in coalescing industry support, which is necessary to move the needle on advanced manufacturing. Robert Ronald is Master Program Manager, Cost Structure, Model Smart Factory and Sustainability, at HP.

The United States leads the world in COVID-19 vaccine availability and is on pace to amass the supply necessary to inoculate its full population by July, a leading business consulting firm said at a recent SEMI webinar.

Dr. Mousumi Bhat, senior director of External Manufacturing at Micron Technology and first female member of the SEMI Southeast Asia Regional Advisory Board, discusses her passion for sustainable business practices and her work driving the transformation of Micron’s manufacturing plant in Singapore.

Traditionally, defect classification is done manually by operators or using Automated Optical Inspection (AOI) machines, often leading to classification inconsistencies. Also, rules-based AOIs may at times be unable to fully satisfy project requirements due to the rigidity of inspection recipes. SixSense – Breaking the Status Quo with Artificial Intelligence Enter SixSense, an AI-powered defect classification software platform that has been making breakthroughs in defect detection and classification for semiconductors to make manufacturing smarter and more efficient. Founded in 2018, SixSense has already amassed a wealth of experience and chalked up a number of successes such as automating the manual image classification process, reducing manufacturing false rejects, and capturing escapees. Infineon Technologies and GlobalFoundries were amongst the early adopters of SixSense’s platform: classifAI. With Infineon, classifAI has allowed over-rejection rates to be precisely quantified. classifAI – Simple UI, Easy Usage, Powerful Models As a UI-based assistive software platform, classifAI, SixSense’s automated defect classification platform is built with the defect and yield engineer in mind. SixSense takes care of all the back-end complexities – such as coding, algorithm modelling and deployment – to enable end users to get started and use the platform with a simple GUI. The simplified end-to-end AI pipeline offered on the platform includes data labelling to make data AI-ready, model training, and model testing. Ultimately, models are deployed on the production floor for 24/7 inferencing of hundreds of millions of images every year, at scale, across processes, tools and sites. Machine learning models built by the SixSense team have seen strong results, with model accuracy of up to 98% in certain use cases. Track Record of delighting IDMs, Foundries and OSAT Customers SixSense has consistently solved visual inspection problems and enabled the success of IDMs, foundries and OSATs since its inception. The AI technology has helped a range of customers across 100mm-300mm wafer standards, both pure silicon and compound wafers, and caters to specific end-use market requirements such as RF and automotive. Partnerships between startups and established manufacturers are key to actualizing the value of AI in manufacturing. “Our collaboration with AI startup SixSense has enabled us to explore opportunities in yield gain, improving cycle time, and real-time monitoring of process shifts,” said Dato’ Tan Soo Hee, Executive Vice President, Global Backend Operations at Infineon Technologies Asia Pacific. “SixSense has been very attentive to the needs of our engineering team, addressing project requirements using a customer-first approach evident in the design of the intuitive software platform,” said Melvyn Peh, Principal Engineer, Automation-Scan-Pack, Infineon Technologies Asia Pacific. The intelligent annotation module is one of many offered by SixSense, which uses AI to train AI and accelerate the data annotation process by focusing on the semiconductor-specific requirements. Another valuable module in classifAI is advanced analytics that capture the heatmap for defect distribution on the images. Images are stacked on top of each other, with the location of defects aggregated to provide the defect heatmap. Through this, systematic failure patterns were identified that allowed defect engineers to zero in on key sources of failure and assist in root-cause analysis. Infrastructure – Scale Fast, Adapt Quickly, Accelerate Value Creation In the dynamic world of technology, machine learning and AI projects must meet changing infrastructure demands. A cloud-first approach is often favored for the plethora of benefits it offers. “We’re looking forward to a great partnership with SixSense, treading together hand in hand exploring fresh ideas and possibilities,” said Manju Jalali, Vice President of digital manufacturing at GlobalFoundries, who oversees the company-wide roll out of classifAI. For use cases where on-premise deployments are preferred, SixSense offers such options for infrastructure integration, satisfying all possible infrastructure requirements in the market. Contributing to a vibrant innovation ecosystem SixSense was mentioned by Singapore’s Deputy Prime Minister Heng Swee Keat during an event that marked Infineon’s 50th anniversary in Singapore: “I am heartened that Infineon will be investing more than $27 million over three years on an AI initiative in Singapore. Under this initiative, Infineon Singapore will be partnering academia, industry, and local startup SixSense AI to develop new AI solutions and courses.” Explosive Growth of AI in Chip Manufacturing According to a McKinsey Company report, AI contribution to semiconductor company earnings is projected to rise to between $85 billion and $95 billion per year in the coming years. SixSense has been taking great strides in creating value for their semiconductor customers. “SixSense offers tremendous value in a high-growth vertical in the semiconductor industry, marrying the latest deep learning algorithm with the compute power of the cloud,” said Rajan Rajgopal, CEO of DenseLight Semiconductor. “This leads to faster root-cause analysis that helps reduce the cost of non-conformance and improve quality.” Dominic Teo is Enterprise Business Development Representative at SixSense. He can be reached at [email protected].

As we move through Q2 of 2021, it seems that the world is finally approaching normalcy. But I don’t believe our lives and businesses will ever be the same. Travel is unlikely to return to the same level as pre-COVID-19 for many years. I’m sure many companies will establish tighter travel policies and budgets as virtual conferencing has proven to be beneficial and cost-effective. Patients and doctors who were skeptical of telemedicine are embracing it, and although it’s not perfect, it has filled a needed gap. Online learning essentially happened over a weekend and will now be part of many curriculums and programs. All of these elements have spurred our semiconductor industry into a super cycle. Demand for chips is leading to an increased demand for semiconductor equipment. Semiconductor capital equipment expenditures in 2020 surpassed $63 billion and are forecast to top $70 billion in 2021. The secondary equipment market typically makes up about 5% to 10% of that. Our inquiries have definitely increased this year. With this in mind, I’d like to share some thoughts for the remainder of the year. Storage of Chipmaking Equipment Not New The semiconductor industry has been experiencing an equipment shortage for some time. It is difficult for original equipment manufacturers (OEMs) to support such a large variety of products and technologies. Some companies use equipment for manufacturing 150mm, 200mm and 300mm wafers. Fabs still run 30-year-old technology on 150mm wafers while the latest technology is manufactured on 300mm wafers. We’ve also seen new technologies like silicon carbide (SiC) being developed on these smaller wafer sizes. Unfortunately, some OEMs stopped making 150mm and 200mm some time ago and have only recently jumped back into the market. These OEMs have had to balance technological advances, pricing, and manufacturing capacity to meet this demand since their primary focus is on 300mm equipment. Third-party refurbished equipment suppliers have also experienced an increase in demand over the last several years. We see it increasing at all technology levels over the next three to five years. This translates to increased equipment pricing for both new and used equipment, as well as increased lead times. Growing Demand for Legacy Tools Many electronic products we use and are familiar with don't require state-of-the-art technology. For instance, cellphones, electric vehicles, wearables, monitors and industrial products still contain many chips manufactured on 200mm wafers using 200mm equipment. There are still approximately 200 200mm fabs worldwide and this makes up about 25% of all wafer capacity regardless of wafer size. These fabs manufacture analog devices, MEMS products, power management ICs, RF devices, discrete devices and sensors. We have also seen an increase in lead times for 200mm equipment. Typical lead times of three to six months have increased in some cases to one year or more. This situation has created a dramatic increase in chip making equipment prices and we do not expect much relief there. Many OEMs transitioned to 300mm equipment prior to 2010. Revenue and profit margins are much higher for them on 300mm equipment. 200mm manufacturing was supported by many third parties for a while. However, in 2016 we saw a resurgence in 200mm equipment, and at that time many OEMs began jump-starting their supply chains. It took some time for them to develop new supply chains, upgrade technology and in some cases hire newly trained engineers to support these new tool sets. All this costs money, which is why we will continue to see an increase in new legacy equipment pricing. Because manufacturers and products may not be able to support these prices, we expect the robust third-party ecosystem to continue. SurplusGLOBAL's Response to this Demand One of the advantages we bring to the secondary equipment market is our ability to recycle technology. We continuously search for opportunities to purchase large packages of tools from companies that are transitioning technology nodes, moving from 200mm to 300mm wafer size or changing product lines. We spend approximately $65 million to $100 million each year on purchasing equipment and in some cases storing it for the right customer. For instance, a memory company may be changing technology nodes and no longer needs its equipment. This use to happen on a predictable schedule. Instead of scrapping that equipment, SurplusGLOBAL purchases and stores it. Sometimes we only need to store it for one month before relocating it. However, in many cases, we store it for one year or more. We may power it on at a later date if it is in good condition. In some cases, we work with an OEM or third party to have it refurbished and ready for a new customer. In response to the need for more secondary market equipment, we have opened up additional offices in Japan and Singapore to stay close to and better support our customers in those regions. Finally, our biggest and most recent endeavor is building our Semiconductor Equipment Cluster, which opens in July 2021. Learn more about the SurplusGLOBAL Semiconductor Equipment Cluster. Emerald Greig is executive vice president Americas at SurplusGLOBAL.

If you look at your clothes or shoes, there is a growing chance you will see the words Made in Vietnam printed on the tag. Since the United States lifted its trade embargo against Vietnam in 1994, the country has become the second largest exporter of apparel and shoes to the U.S. What may be less evident is the source of that new electronic gadget you received for Christmas, with its numerous parts, chips, and intricate supply chain. While light manufacturing has dominated Vietnam’s economic growth since the Đổi Mới economic reforms implemented in the 1980s, over the last decade the country has been repositioning itself to become a dominant player in the global microelectronics industry, a trend that has gained momentum in the wake of the U.S.-China trade war. In 2019, Vietnam ranked as the fourth largest exporter of electrical goods and components to the U.S. With exports doubling over the last four years and now exceeding $19 billion, surpassing Taiwan, Japan, and Korea (based on goods exported under chapter 85 of the Harmonized Tariff Schedule). Vietnam’s global electronics industry now accounts for about 40% of its exports, and the country seems to be just getting started. Early Entrants Though Vietnam owes its growing success in attracting foreign direct investment (FDI) in the semiconductor and microelectronics industries to the advent of China plus one – the business strategy to diversify business investments geographically – it was the few early entrants that gambled on this emerging market a decade ago that put Vietnam on the global stage. Of these early players, no other firm comes close to having the impact that Samsung has. It’s initial $670 million mobile phone manufacturing plant in the northern province of Bac Ninh in 2008 grew to a country-wide investment of $17.3 billion within a decade. Samsung is now Vietnam’s largest FDI contributor and accounts for more than 25 percent of its exports. Because of Samsung, Vietnam has become the second largest exporter of smartphones in the world. Around the same time, Intel opened its $1 billion semiconductor assembly and testing facility in Ho Chi Minh City, putting Vietnam firmly on the global technology map. More investors, like LG, Panasonic and Foxconn soon followed. Within a few years of these initial investments the industry was taking notice, illustrated by SEMI’s role in co-organizing the Vietnam Semiconductor Strategy Summits in 2013 and 2014. With SEMI SEA’s increased efforts to promote Vietnam as an important ecosystem in the electronics supply chain, more will be done to positively influence the growth and prosperity of its member companies in Vietnam. These early investors found Vietnam attractive for several reasons. Key among these are the country’s low wage rates combined with its favorable demographic structure – what the UN refers to as the golden population structure, which provides “Vietnam with a unique socio-economic development opportunity.” Companies are also attracted to the growing number of Free Trade Agreements (FTAs) that Vietnam belongs to, including the ASEAN Free Trade Area, CPTPP, the EU-Vietnam FTA, and, most recently, RCEP. Though the U.S. has yet to ink a trade agreement, the Singapore AmCham’s annual regional survey has consistently identified Vietnam as the most attractive country in ASEAN for a potential bilateral FTA partner with the U.S. Leveraging the Trade War If the plus one strategy was the catalyst that started this wave of electronics manufacturing in Vietnam, then the U.S.-China trade war was the enzyme that supercharged it. A common quip in Southeast Asia is that the U.S.-China trade war is over and Vietnam is the winner, and this is apparent in both trade and investment trends. According to the Asia Development Bank (ADB), the riff between the U.S. and China has caused a redirection in trade, as U.S. imports from the PRC fell by 12% in the first six months of 2019 while U.S. imports from Vietnam increased by 33%, with electronics and machinery accounting for the bulk of this jump. The ADB further reported that in a prolonged and intensified trade conflict, the worse-case scenario would result in Vietnam, Malaysia, and Thailand being the biggest winners, “in that order.” On the investment side, a March 2020 Gartner, Inc. survey of global supply chain leaders revealed that 33% had “moved sourcing and manufacturing activities out of China or plan to do so in the next two to three years.” While this survey did not mention specific winners, the ADB reported that “newly registered FDI in Vietnam from the PRC and Hong Kong rose by 200% year on year in the first seven months of 2019,” indicating the move of Chinese suppliers to Vietnam. Additionally, a review of recent press reports indicate firms like Apple, Nintendo and Dell are encouraging suppliers to move parts of their supply chains to Vietnam. These suppliers are complying, with Compal Electronics, GoerTek, HZO, Inventec, Luxshare Precision Industry, Pegatron, USI and Wistron all reportedly announcing plans for new investments in Vietnam. Manufacturing Hubs Within Vietnam, microelectronic facilities have concentrated in a few geographic hubs. In the south, the Saigon High Tech Park in Ho Chi Minh City attracted early entrants Intel and Samsung, with firms like Nidec and Jabil soon following. The largest investment capital, however, developed in the northern provinces that ring Hanoi. Bắc Ninh, an hour’s drive from Hanoi, was the site of Samsung’s first investment and has since attracted Foxconn and Canon. More recently, firms have been drawn to the port city of Hải Phòng, the country’s third largest city, which is already home to Samsung and LG. The city’s close proximity to other manufacturing clusters, its new deep-water port, and its expressway that provides a 12-hour trucking route to China’s electronics epicenter in Shenzhen are helping make the city Vietnam’s new high-tech production center. In 2019, LG Electronics moved its entire smartphone production line from South Korea to Hải Phòng, and in 2020 Pegatron reportedly chose the city for its $1 billion investment plan. Local phone manufacturer VinSmart is also producing the country’s first 5G smartphones in Hải Phòng. In November, USI, a subsidiary of Taiwan-based ASE Holding, broke ground on its first production base in Southeast Asia, a $200 million phase-one investment in the production and assembly of chips for wearable electronic devices. USI’s investment, which is moving into the internationally managed DEEP C Industrial Zones in Hải Phòng, is “intended to move us closer to our overseas customers and accommodate their ever-increasing demand,” according to Mr. Kuei Chun Chi, the firm’s Manufacturing Service Director. “North Vietnam, with its strategic geographical position and an extended infrastructure in place, offers USI an optimal way to facilitate fast and flexible response to customers' orders.” Though the Covid-19 pandemic has dampened the pace of new investments in Vietnam’s microelectronics industry, it has also amplified the country’s attractiveness to investors. Vietnam was successful in containing the outbreak through aggressive quarantine and contact tracing measures, and as a result its economy has the brightest outlook in the region. The ADB forecasts the country will be one of the fastest-growing economies in SEA in 2021, with GDP estimated at 6.8%. The Ministry of Industry and Trade is also reporting that several of the world's largest technology corporations plan to shift their production chains to Vietnam post-Covid-19, an indication that technology firms will accelerate relocation plans in 2021. Vietnam’s successful response to the pandemic, combined with its strategic location, low wage rates and foreign trade agreements, will ensure that the region continues to benefit from the shift in supply chains in Asia, making it the new destination for electronics manufacturing. About the Author Stuart Schaag is Principal at E-Ward Trade Consulting LLC, which assists firms that are expanding their presence in the global marketplace by creating strategies combining market analysis, business development, commercial diplomacy, and relationship building. He previously spent 25 years in various domestic and overseas positions in the U.S. Department of Commerce’s International Trade Administration. Stuart served as the Commercial Counselor at the U.S. Embassy in Hanoi from 2014-2018 and resided in Vietnam until 2020.