Intel Considers Boost To Investment In Vietnam Chip Packaging Plant

Intel Corp (INTC.O) is considering a substantial boost in its existing $1.5-billion investment in Vietnam to enlarge its chip testing and packaging factory in the Southeast Asian nation, two sources with knowledge of the matter told Reuters.

The potential move, which one source said could be worth about $1 billion, would indicate a growing role for Vietnam in the global supply chain for semiconductors, as firms push to reduce reliance on Taiwan and China owing to political risks and trade tension with the United States.

One of the sources said the investment would probably be made “over the future years” and could be even greater than $1 billion, while the second person said Intel was also considering an alternative investment in Malaysia and Singapore, which may be preferred to Vietnam.

Both sources requested anonymity as the plan was confidential. Asked about the possible investment plan, Intel told Reuters:

“Vietnam is an important part of our global manufacturing network, but we have not announced any new investments.”

Officials of Vietnam’s investment and planning ministry and the provincial government of Ho Chi Minh City, where Intel has an existing plant, were not immediately reachable for comment. A statement on the Vietnam government’s official portal was revised on Wednesday to remove a reference to an effort by Ho Chi Minh City to win $3.3 billion in additional investment from Intel.

This chip packaging and testing plant in Vietnam’s southern commercial hub is Intel’s largest globally. The firm is approximated to have invested roughly $1.5 billion in it so far.

The U.S. chip behemoth already has extra land where its factory is based and an expansion in Vietnam would help it better cope with supply disruptions arising from relying greatly on a single country or a factory, one of the sources told Reuters, citing internal talks.

One of the sources said Intel was considering the Vietnam investment while making sure a further expansion abroad would not be viewed as a hostile move by Washington, which is moving to ramp up production of chips at home.

Aggressive Push

Vietnam is aggressively pushing to grow its chipmaking industry, courting foreign firms in all three main segments of designing; manufacturing with fabs; and assembling, testing, and packaging, officials said.

A U.S. industry executive told Reuters the country had huge potential to grow rapidly in the area of chip assembling and designing, whereas he saw developing chip-manufacturing fabs as a distant possibility, with the exception of cheaper-to-build fabs for less sophisticated, larger chips that are still in high demand, such as those that are used in cars.

The executive said Vietnam’s greatest opportunity was in the chip assembling sector to meet industry demand to decrease the “over-concentration” of production capacity in Taiwan and China, which together make up 60% of global capacity in that segment.

Designing chips require less capital and more very skilled workers, and Vietnam was advancing there too, the executive said, with U.S titan Synopsys having operations there and with local companies growing fast, including FPT and state-owned Viettel.

Chips and electronics giant Samsung (005930.KS) started a research facility in Hanoi in late 2022 and has a semiconductors packaging factory in the country. Following a global shortage of semiconductors in the wake of the COVID-19 pandemic, Intel revealed a plan in late 2021 to invest over $7 billion to set up a new chip packaging and testing plant in Malaysia.

That facility is expected to start production next year. Intel also has testing and packaging factories in the U.S. and China.