For much of the past three decades, Vietnam’s economic success has rested on becoming one of the world’s value-for-money manufacturing destinations. Vietnam recognizes that companies and countries around the world are seeking to ameliorate their China risk by having another country (the “plus one”) as a source of resources (e.g., critical minerals) and manufacturing.

Now, fresh off its World Bank reclassification as an upper-middle-income country, Hanoi has a far more ambitious objective: to become an indispensable player in the physical layers underpinning artificial intelligence (AI).

Semiconductors sit at the center of that ambition. Over the past two years, Vietnam has unveiled a series of initiatives that together amount to one of Southeast Asia’s most ambitious semiconductor strategies. The government plans to train 50,000 semiconductor engineers by 2030, launch a $100 million venture capital fund inspired by Israel’s Yozma program, dramatically increase public spending on science and technology, attract additional foreign investment from global technology leaders, and secure domestic supplies of rare earth minerals that are critical inputs into chip manufacturing. 

Taken together, these initiatives represent something more significant than Vietnam’s past approach to industrial policy. Hanoi is using economic statecraft to position itself within global value chains as a means of fueling continued economic growth and sovereignty.

The ambition is evident, but whether these policies deliver will depend on whether they genuinely build technological capabilities. Historically, the financially strapped state invested too little in science and technology and a “two-speed” economy persisted, where foreign firms operating in Vietnam did not effectively translate into upskilling Vietnam’s firms and workforce. Can this push be different?

From Assembly and Testing Hub to Semiconductor Design and Manufacturing Strategy

Vietnam’s government is now hustling to transform its assembly and testing, and low-cost advantages, into something more ambitious and, hopefully, durable.

Decision No. 1018/QD-TTg, adopted in September 2024, lays out Vietnam’s national semiconductor development strategy through 2050. The strategy is captured in the slogan “C = SET +1.”

The formula envisions Vietnam’s chip industry (C) as a result of building specialization (S), electronics (E), and talent (T). The “+1” reflects Vietnam’s ambition to become the preferred alternative destination for semiconductor investment as firms seek to diversify supply chains beyond China.

At the core of this formula is Vietnam’s ambition to move beyond its outsourced semiconductor assembly and testing (OSAT) offering. Vietnam aims to become an increasingly sophisticated participant across semiconductor design, packaging, testing, and eventually manufacturing.

The roadmap is ambitious in its quantity indicators, but less concrete around the quality. 

During the first phase (2024-2030), Vietnam plans to attract at least 100 chip design companies, establish one semiconductor fabrication facility, and develop 10 packaging and testing plants. By 2040, these targets rise to 200 design companies, two fabrication plants, and 15 packaging and testing facilities. By 2050, the government hopes Vietnam will host 300 design firms, three fabrication plants, 20 OSAT facilities, and become an internationally competitive center for semiconductor research and production.

To enable this scale of activity, the strategy emphasizes training large volumes of Vietnamese workers. The government has committed to train 50,000 semiconductor engineers by 2030. Universities are rapidly expanding semiconductor programs while firms are increasing partnerships with educational institutions to develop specialized talent.

The strategy is right to focus on skills and talent. Taiwan’s semiconductor success, for example, rested as much on decades of investment in engineering education and technical know-how as on the sophistication of TSMC’s fabrication plants themselves.

Vietnam appears to recognize this lesson. The challenge will be in delivering on these government-industry-university collaborations to deliver training programs at the quality and scale needed. 

A Step-change in S&T Investment

The Vietnamese government’s science and technology spending has historically underperformed that of other countries, including China, in comparison to similar moments in their upgrading trajectory. For instance, rather than the 2 percent China was allocating to S&T in the mid 2010s, only 0.7 percent of the Vietnamese state budget was spent on S&T. 

That appears to be changing. The 50,000 chip engineers training program has allocated a $1 billion budget. Last month, Vietnam announced plans to establish a $100 million venture capital fund. 

Previously, the building of Vietnam’s VC market went “around the state,” rather than benefitting from government fund of funds or co-investment. Startup initiatives focused on relatively inexpensive programs such as Techfest and Vietnam Silicon Valley, not substantial public investment. 

More recently, however, Hanoi has announced plans to increase science and technology spending to between 3 and 4 percent of the state budget, alongside major infrastructure projects and significantly larger investments in innovation.

The challenge, however, is whether the spending, and especially the venture capital initiative, are spent effectively. 

The $100 million fund is inspired by Israel’s Yozma program, which famously fostered Israel’s nascent VC industry in the early 1990s. Yozma was not merely a government investment fund allocating to projects and startups. It was designed to catalyze an entire venture capital industry by partnering with private fund managers and requiring substantial foreign co-investment. Those international investors brought more than capital. They introduced global networks, investment expertise, and an external signal of quality that helped integrate Israeli VCs (and startups) further into international markets, especially the United States.

The key to Yozma’s success lay in institution-building. From the beginning, Yozma was meant to become obsolete; the design was to privatize in five years, with the fund serving as a one-time catalyst for building a cohort of early-stage Israeli VCs. It delivered: by 2000, Israel’s VC market was second in absolute size to only the United States. Many countries, including New Zealand, Singapore and Taiwan, have adapted local versions of Yozma. 

Vietnam’s proposed adaptation remains less clear.

The Ministry of Science and Technology said it will “gradually mobilize private capital, accounting 30 to 40 percent of the total capital, alongside the development of separate funds for different technology sectors.” The fund will need to report to the National Assembly and speaks of “market-based recruitment and compensation” that will allow autonomy to the “fund’s investment council.” This sounds more like a government VC fund than the Yozma model that catapulted Israel’s VC industry from a handful of small funds to a thriving market. 

International experience, including evidence discussed in my book “The Venture Capital State” and Josh Lerner’s “Boulevard of Broken Dreams,” shows that government venture funds often struggle when political objectives replace commercial discipline. 

Equally important, Vietnam today differs fundamentally from Israel in the early 1990s. Unlike Israel at the launch of Yozma, Vietnam already possesses an established venture capital ecosystem. Firms such as Mekong Capital, VinaCapital, Dragon Capital, IDG Ventures Vietnam, and numerous international investors have operated in the country for decades.

This raises important policy questions. Is the objective of Vietnam’s Yozma-inspired VC fund to strengthen existing venture capital capabilities, to crowd in additional international institutional investors, or simply to increase the volume of capital? The answer matters because different designs are needed.

The Challenge of Quantity Versus Quality

Vietnam’s semiconductor strategy is impressive in its ambition. Yet one notable feature of the roadmap is that many targets measure the number of firms rather than technological capability. Establishing 100 design companies says relatively little about how Vietnam intends to compete along the semiconductor frontier.

The firms will focus on mature chips, which means focusing on the 32-nanometer chips used in automotive, industrial equipment, and telecoms. It is not striving to chase the advanced chips, now at 5 nm or less, that Taiwan dominates. 

The aim is to leverage current design activity in Vietnam. Japanese firms like Panasonic and Toshiba, and Korean giants like LG and Samsung Electronics, are already present. Intel has, famously, invested more than $4 billion in its facility outside of Ho Chi Minh City since 2007. 

Vietnam’s own champions, FPT Semiconductor and Viettel, are expanding their capabilities. They are doing some if it in partnership with global leaders in AI, including Nvidia. FPT Corporation, for example, is investing $200 million in building an AI factory featuring super computers based on Nvidia’s H100 Tensor Core graphic processing unit (GPU) technology.  

This is promising, though questions remain about whether the “two-speed” economy will converge, and Vietnam’s national capabilities advance. Determining that requires measuring more than the number of participating firms.

China’s Made in China 2025 strategy, for example, established explicit objectives around global market share and technological self-sufficiency. Whether or not those targets were fully achieved, they reflected an understanding that industrial capability ultimately depends on performance rather than participation.

Delivering on Vietnam’s Chip Strategy

Vietnam enters this new phase with significant momentum. It was one of the world’s fastest-growing economies in 2025, extending more than 30 years of sustained economic growth since the doi moi reforms.

The government’s semiconductor strategy demonstrates growing capabilities and willingness to invest big in upgrading capabilities. The direction of travel is therefore positive.

The central challenge for Vietnam is now one of ensuring absorptive capacity: that foreign investment generates domestic technological learning; that engineering graduates develop world-class capabilities rather than simply increasing headcount; that government venture capital investment expands its internationally connected investors rather than serves as a state financing vehicle that may crowd out market-based capital. 

Competing in AI chips is one of the defining features of 21st century geopolitics. Vietnam has correctly recognized that this presents an historic opportunity. The question now is whether its economic statecraft can help foster truly competitive chip design or manufacturing capabilities.