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AMCC sees potential in Vietnam

Posted: 16 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Vu Nguyen interview? design center? Vietnam IC market?

Nguyen: If you are talking about engineering development, I see Vietnam as a rising star.

Vietnam seems to have endeared itself to investors worldwide for the past two years. Although still not in the same league as China and India in terms of investor spending, Vietnam has attracted attention from the likes of Intel, STMicroelectronics, Foxconn and Samsung. The country, once saddled in poverty, is now one of Asia's fastestdeveloping nations, according to an article by the The Economist, with annual growth averaging 7.5 percent over the past decade.

Playing a key role in such stellar performance is the government's pro-business stance. The country's membership into the World Trade Organization also improved the business climate.

Although India is touted to be the world's fastest growing semiconductor market, Gartner Inc. identified another contender for the title. Labeled as "other Asia-Pacific" markets by Gartner, the group includes Southeast Asian nations such as Indonesia, the Philippines, Thailand and Vietnam. And which country among this group would register the highest compound annual growth rate? Vietnam, of course at 46 percent.

By the numbers, Vietnam's semiconductor market will be worth $6.6 billon by 2012, according to Gartner. For comparison, the Indian semiconductor market is forecasted to reach $9.8 billion by 2012.

"Continued growth in China, rapid growth in India and emerging markets such as Vietnam and Thailand are important contributors to the growth of the regional market," said Phillip Koh, research VP at Gartner's Asia Pacific semiconductor group. "In the longer term, Asia Pacific will continue to attract foreign investment, with low manufacturing costs and huge domestic demand."

It will be just a matter of time before Vietnam ascends to its proper place in the investment arena. And one company with a front-row seat to watch how Vietnam will evolve through the years is Applied Micro Circuits Corp. (AMCC).

In March, AMCC established a design center in Ho Chi Minh City. The center focuses on IC design, software development and expanding its capability in the area of software integration.

In this interview with Vu Nguyen, president of AMCC Vietnam and VP of engineering for AMCC, talks about why Vietnam is the top choice for the company's design center.

EE Times-Asia:Why did you decide to set up your design center in Vietnam?
VU Nguyen: We are looking to expand, and the bottom line is a low-cost design center. If it would be high-cost, we might as well do it in North America where we have five design centers today.

Vietnam is on top of the list for several reasons. Vietnam has a large population under the age of 25. About 60 percent of its population is under the age of 35. Labor cost is very low.

Meanwhile, skilled workers in Vietnam tend to concentrate in three citiesHo Chi Minh, Hanoi and Da Nang. And Ho Chi Minh is very attractive from our standpoint. So if you really look at the bottom line, there's the young population of Vietnam, the high density of skilled workers in Ho Chi Minh City, and the low labor cost attached to Vietnam in general and to Ho Chi Minh City in particular.

But you evaluated several countries before settling on Vietnam?
Yes. In an electronic engineering organization, you first look at labor cost, then real estate cost, then capital cost, then you look at workforce, and if they [potential location] have people to do the job.

Let me answer your question in the reverse.

If you look at the skilled workers, certainly you can do it anywhere in the world. I'm saying this in terms of AMCC's requirement of number of people. Then if you look at the capital cost, capital cost is the same everywhere. If you look at the real-estate cost, still almost the same everywhere.

Then you look at labor cost. For a design center, New Zealand, Romania they can be expensive. You want to go somewhere where when you start, you want to see the benefit for the next eight to 10 years.

If you go to China today, you don't get that. You may get two years or so. That's why we picked Vietnam. I think it is a bit too late to go into China.

How about the skill sets of Vietnam engineers?
If you have been looking at Vietnam for the past several years, the country has been pushing forward software. Thus, it has been proven that software can be done here [in Vietnam].

Our company is a chip company, so we need chip design engineers. And today, even though we do chip design, we need software development, software QA and all that.

So we established that whole engineering organization here. We have five groups here. We have a chip group, a hardware design group, a software group, a software QA group and a software product examination group. If you look at these groups, three of them are very software-oriented.

In terms of chip design engineers, we've spent a lot of time looking. There are some but not a lot.

How do you reconcile your need for skilled workers and what Vietnam offers?
We are not really looking for hundreds of people for the two chip design groups. We only need about 50.

This is our philosophyhire 25 experienced workers and 15 to 20 new graduates, who will undergo training.

To make this work, what we do is send five expats from the U.S. [to Vietnam]. These managers manage the local hires directly. These expats are the key to make this setup successful.

It has been going well. The five of us are key in bridging the communication gap and culture gap between the U.S. and Vietnam, managing the locals directly and very effectively, because the five of us are here in Vietnam.

How does the Vietnam design center complement AMCC's design centers in the U.S.?
The design center is the extension of the engineering organization in the U.S. We basically have projects from the U.S.

When we are doing development, we have brand new development. We also have development that is a modification, derivative of some products.

What role did the government play in helping AMCC decide to locate in Vietnam?
We got a very attractive incentive package from the government, and this helped also in deciding to locate in Vietnam. Also, the government has several hi-tech parks. The parks have very good utilities and infrastructure.

It looks like Vietnam is well ahead of its neighbors.
Definitely. Singapore is too expensive already. If I compare Vietnam with the Philippines, Malaysia or Indonesia, I would say Vietnam is a rising star from an engineering design standpoint, not manufacturing.

As I have said, engineering can be done everywhere. If you are talking about engineering development, I see Vietnam as a rising star.

- EE Times- Asia

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