“On behalf of Intel’s 85,000 employees, I would like to say, ‘Hello Vietnam,’“ company CEO Paul Otellini told an auditorium packed with enthusiastic government officials, employees and other dignitaries during a ceremony that featured a dragon dance and women in traditional Vietnamese gowns. The Santa Clara, Calif., chip giant’s arrival in the Southeast Asian country put it “on the map for high-tech investment and helped the country attract significant investments from several leading global technology firms, including Foxconn and Compal,” he added.
While China’s role as the assembly line for iPhones and PCs remains unchallenged, countries like Vietnam hope to peel away a significant amount of tech business to become global subsidiaries of the world’s factory floor. Intel’s decision to build the plant in 2006 in a country without a single world-class university and instead of countries like India and China jolted the global tech world.
“This is exactly what China doesn’t want to lose,” said Gene Tyndall, a global supply chain expert at consultant Tompkins Associates. “They don’t care much about low-end stuff. But there is a big push by the central government to keep what they have and get more in high tech.”
At full capacity, Vietnam’s first semiconductor factory, which produces chipsets for mobile devices and laptops, will double Intel’s assembly and testing capabilities. The complex has the ability to produce microprocessors in the future.
“Companies in China have been looking for an alternative,” said Lam Nguyen, IDC’s Vietnam analyst.
The massive factory, located in the city’s more remote District 9, underscores the complex strategic bets Intel makes years ahead of its moves. The process of choosing Vietnam began with secret meetings in Santa Clara between company executives and high-ranking government leaders from Hanoi so as not to trigger protests from anti- communist Vietnamese-American groups in Silicon Valley.
Nearly a decade in the making, the 500,000-square-foot factory had to be built on top of 8,800 stilts that burrow six stories down through unstable sandy soil to reach bedrock.
Intel has also faced a dearth of qualified job candidates. While Vietnamese workers are known to be smart and hardworking, the country’s school system focuses more on theory than practical learning. About two years ago, the company tested 2,000 graduating Vietnamese students. Only 90 were able to score at least 60 percent on the standard exam, and half of those failed an English competency review. The company is supporting various education initiatives and has helped to train 87,000 teachers in the country.
Increasingly, supply chain experts say, multinationals will be looking at diverse regions to plant their new plants.
“I think the era of, ‘We are going to move everything to India’ — a single place — is over,” said Jennifer Daniell Belissent, a Forrester Research analyst. “Now that the economy is becoming more global, people are comfortable with having a portfolio of geographies in their supply chain. We will see more diversification.”
Vietnam is one country that is benefiting from this shift.
Hewlett-Packard recently started soliciting for software engineers to staff a new outsourcing operation in Ho Chi Minh City, an investment reported to be $18 million. And Vietnam-based software outsourcing companies say they are experiencing more interest from companies thinking of moving some of their projects away from higher-cost India and China.