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Vietnam reaches for electronics dream!despite hurdles

Posted: 20 Sep 2007 ?? ?Print Version ?Bookmark and Share

Keywords:Vietnam electronics dream? Saigon Hi-Tech Park? Vietnam hurdles?

The Saigon Hi-Tech Park (SHTP) today looks a little more than a flattened patch of land on the dusty outskirts of Ho Chi Minh City, Vietnam's commercial heart.

But like the country itself, it's a place with big ambitions that look set to become a reality. The zone has attracted a whopping $1.4 billion dollars in investment over the past five years, and will soon be home to the largest factory in Intel's global network as well as operations from Nidec, Sonion and Jabil Circuit. When it becomes fully operational in late 2008 the first phase of the park will house 40 companies needing over 20,000 workers, a precision mechanics laboratory and a technology training institution, a dedicated wireless broadband network and even a venture capital fund.

And SHTP President Nguyen Dinh Mai doesn't plan to stop there. Employees are already hard at work on a second phase that will bump its total area up to over 600 hectares. The park is also developing rental factories for the smaller firms that will support its larger tenants, as well as a special zone for design, software development and outsourcing firms that will result in a "completed supply chain" and advance the park's strategy of eventually shifting from manufacturing to services.

'Comparable to the best'
Though he admits Vietnam is a "latecomer" to the industry compared to China and India, Mai says the government is committed to "integrating deeper and deeper into the global economy," and building a legal framework for technology companies "that's comparable to the best in the world."

And the world appears ready to take Vietnam at its word. Intel's massive investment may have propelled the country into the headlines, but a host of other names are setting up shop here!Matsushita with an embedded software center, Toshiba with a research and development facility, and the newly formed Vietnam-Chipscale Advanced Packaging Services with a $200 million packaging plant.

Taiwan contract manufacturer Foxconn is reportedly poised to pour some $5 billion into factories throughout the country. In a recent study PricewaterhouseCoopers named Vietnam the most profitable emerging market for manufacturing companies, and said it was now a "serious rival destination" to powerhouses India and China.

Ask anyone about the country's greatest strength and the answer is almost always the same!its people.

"The country has always had a very good work ethic; poor families are the most eager to send their children to school," Mai says. "There's a tradition of self improvement and being eager to learn, which results in a workforce that's easy to train!and that's very young."

"Vietnamese engineers are excellent, and very suited to creative tasks," agrees Tsuneo Sato, the outgoing president and CEO of Renesas Design Vietnam, which was one of the first major arrivals to the country when it opened its doors in 2004. "They may not have much experience in design or the semiconductor industry, but they study and learn a lot faster than engineers in other locations."

Warmer reception
Add to this a government that Sato says is "aggressively" looking to groom the hi-tech industry!authorities recently unveiled a plan to more than double annual electronics exports to at least $3 billion by 2010!and it's no surprise multinationals find Vietnam a welcoming environment. SHTP, for example, offers investors such goodies as a four-year income tax holiday, import duty exemptions and fast-track visa, investment application and customs services. And many note those moving into the country are likely to get a warmer reception than they would in more crowded destinations.

"In China you have to be an Intel to get attention, whereas in Vietnam you can be a small guy and still get the government's support," says Fred Burke, managing partner at law firm Baker & Mackenzie's Vietnam practice.

But even its biggest advocates say Vietnam needs to address some serious shortfalls if the appeal of the country's young, dynamic workforce has apparently grown to the extent that shortages are starting to emerge!a situation that's likely to grow worse as more companies move in.

"There's a lot more competition in this industry now, so in that sense it's become a bit difficult to hire more good engineers... sooner or later the costs are going to start increasing," says Sato, who is trying to source around 500 staff over the next two years for a new design facility. He believes the crunch is unlikely to ease in the foreseeable future as schools continue to emphasize software over hardware-related skills.

Others say it has become even harder to fill senior positions.

"At the basic engineer level there's a really good pool of talent because Vietnam has a lot of educated people who are strong in math and science," Burke says. "The real shortage is as you get up to the project management level."

Legal professionals also see some aspects of Vietnamese law as problematic, especially if the government hopes to develop the domestic technology industry. Burke says while new technology transfer legislation will make it easier for foreign firms to disseminate solutions or knowledge to local partners, local copyright law leaves the door open for inventors or developers to stake claims to work produced under contract.

Baker & Mackenzie partner Seck Yee Chung notes foreign exchange regulations make it difficult for Vietnamese firms to repatriate earnings from revenue-sharing arrangements, and says the government should encourage collaboration in the information technology industry by making it easier to license business cooperation contracts.

Vietnam also shares some of the weaknesses common to other developing Asian nations.

"Infrastructure, especially in communications, is poor," Sato sighs. "Broadband is still very slow, so when we try to send a lot of data to Japan, everything gets stuck."

A 'looming cloud'
Rick Howarth, general manager of Intel Products Vietnam, says corruption remains a "looming cloud" over the country, and that its bureaucracy could prove trying for smaller investors.

"It's easier for us!we've had the red carpet," he says. "The followers, the smaller customers, will have more difficulty than we do. But coming in understanding that there are going to be difficulties, and if you have the right level of patience, it can work, you can get things through the system."

Officials insist they are not ignoring the obstacles that could dog the electronics sector in the years ahead.

"Of course in the years ahead there will be some constraints, but in places like the educational system the country is already making efforts to improve itself," says SHTP's Mai. "There's still time for us to develop."

After all, he says, Vietnam has built an industry from scratch before. "It's the same as with software five years ago, there was nothing here, and no one could imagine that Vietnam would be a place where you could get (development) done," he says. "But nowadays more and more people come to do just that."

- Jonathan Hopfner
EE Times

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