The Race to Attract FDI in the Semiconductor and AI Sectors

The race to attract FDI in the semiconductor and AI (artificial intelligence) sectors in the Asia-Pacific region is intensifying. Among the competitors, India holds an advantage with numerous preferential policies. Vietnam is also actively competing to attract foreign capital in these sectors.

Direction for FDI Inflow into Vietnam

Recently, there have been reports suggesting that “FDI eagles” are leaving Vietnam, citing Heineken’s temporary suspension of its brewery operations in Quang Nam since mid-June 2024.

In fact, although there is a trend of scaling down and relocating, this does not mean that “FDI eagles” are leaving Vietnam. The FDI wave is shifting to other key sectors such as the semiconductor and AI industries.

Following Heineken’s recent closure of its plant in Quang Nam, the company invested over VND 12,600 billion in Ba Ria – Vung Tau to build a brewery with a capacity of 1,600 million liters per year. Ba Ria – Vung Tau now hosts Heineken’s largest brewery in Southeast Asia.

Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, shared this information during a press conference on the “HCMC Real Estate Market in the First Half of 2024.”

“The contraction of some brands like Unilever (in consumer goods) is due to the fact that domestic conglomerates like Masan are performing well and taking over the market. On the other hand, international semiconductor businesses are expanding. We have been working with many U.S. partners who want to expand in Vietnam in this field,” Ms. Trang shared.

According to Ms. Trang Bui, the contraction or expansion of factories is inevitable. However, this does not imply that “FDI eagles” are leaving Vietnam. One crucial factor to note is that Vietnam is a vital link in the supply chain, not an international financial hub.

In the first six months of 2024, FDI inflows into Vietnam continued to follow an increasing trend, with a focus on the processing and manufacturing industries. Ms. Trang noted that the competition for FDI is particularly fierce in the semiconductor sector.

CBRE Vietnam also recorded that electronic manufacturers continue to lead the market in the North with significant transactions from Victory Giant and Foxconn in Bac Ninh. In the South, there is a trend towards expanding into markets like Long An and Ba Ria – Vung Tau, where industrial land is still relatively abundant, and rental prices are more competitive compared to other primary markets.

The Semiconductor and AI Race

The semiconductor and AI race in the Asia-Pacific region is intensifying. Everyone wants to become a hub for semiconductors and AI. Japan, South Korea, Singapore, Taiwan, and China all aim to be the leaders. India has many advantages with numerous preferential policies, and Vietnam is also actively participating in this race.

Amid the wave of investment shifts in the region, the Indian government has continuously introduced large-scale support packages to attract investment from companies in high-tech sectors.

The Indian government announced a large-scale support package to attract investment from companies in high-tech sectors such as batteries and semiconductors. The government even offers financial support ranging from tens to hundreds of millions of USD, including reimbursing 40% and 50% of construction costs for investors building battery and semiconductor manufacturing plants.

Deputy Minister Kumar Singh stated: “Our goal is to attract large-scale battery manufacturing plants with an annual production capacity of 20GWh or more. We plan to support 40% of the construction costs and provide subsidies worth 300 million USD for battery production.” 

So far, the government is expected to support 40% of the construction costs for battery manufacturing plants, and additional support from state governments where the plants are located is also being considered.

Semiconductors are also mentioned as a key field attracting FDI. Deputy Minister Kumar Singh revealed that if investors collaborate with an Indian company to build a plant, they could receive support of up to 10 billion USD. The Indian government is expected to support 50% of the necessary construction costs as a subsidy.

As the importance of semiconductors in the supply chain increases, large-scale support measures are being implemented to attract manufacturing facilities. Not only the central government, but also local governments have planned to support 20% of the construction costs. A prime example is Micron, a U.S. memory semiconductor company, which decided to invest 2.75 billion USD to build a post-processing semiconductor plant in Gujarat, India, last June.

Source: Redsunland

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