Intel has decided to halt a proposed investment in Vietnam, a move that could have nearly doubled the chipmaker’s operations in the country, Reuters news report said.
This decision deals a significant setback to Vietnam’s aspirations in the semiconductor industry, which aimed to position itself as an alternative to China and Taiwan amid ongoing political risks and trade tensions.
Vietnam has become a prominent electronics manufacturing hub and is home to Intel’s largest worldwide factory for assembling, packaging, and testing chips. The country had been counting on Intel’s expansion, especially after U.S. President Joe Biden announced deals to support Vietnam’s chip industry during his visit in September.
However, shortly after Biden’s visit, U.S. officials informed a select group of American businessmen and experts that Intel had abandoned its expansion plans, according to one participant in the meeting. The source, requesting anonymity due to the confidential nature of the information, indicated that Intel had made this decision around July.
While Intel did not provide specific reasons for canceling the expansion, a second source who attended meetings between U.S. companies and Vietnamese officials in recent weeks revealed that Intel had expressed concerns about the stability of power supplies and excessive bureaucracy.
One of these meetings occurred last week in Hanoi and included Vietnam’s Deputy Prime Minister Tran Luu Quang.
Intel, when asked about the decision, declined to comment but assured Reuters that “Vietnam will continue to be a critical part of our global manufacturing operations as demand for semiconductors grows.”
The U.S. embassy in Hanoi refrained from making any comments on the matter, and the Vietnamese government did not respond to requests for comment.
This unexpected turn of events deals a blow to Vietnam’s growing ambitions to play a more significant role in the global semiconductor industry. The country had been engaged in discussions with chipmakers, hoping to attract firms looking to diversify their supply chains.
Intel’s decision follows its announcement of significant investments in Europe in June, and it coincided with power shortages in Vietnam in the same month, which led to several manufacturers temporarily suspending production. Additionally, Intel is expanding its investments in chip packaging in Malaysia, a key rival to Vietnam in Southeast Asia.
During Biden’s visit to Hanoi, the White House unveiled initiatives and investments by U.S. chip companies like Amkor, Synopsys, and Marvell, but Intel was notably absent from the announcement.
Chung Seck, a partner at law firm Baker & McKenzie Vietnam, cautioned against assuming that Intel’s previous investments in the country would automatically lead to further investments, noting that the company’s decisions could be influenced by various factors.
In February, Reuters reported that Intel was planning a new investment in Vietnam potentially worth around $1 billion, aimed at boosting its existing $1.5 billion factory in the country. At the time, Intel had responded by stating, “Vietnam is an important part of our global manufacturing network, but we have not announced any new investments.”
Notably, the Vietnam government’s official portal had mentioned plans to attract $3.3 billion in additional investment from Intel, but this reference was later removed after media reports surfaced.
Intel and other multinational corporations have been urging the Vietnamese government to provide significant incentives worth millions of dollars as it implements a new levy on large companies, part of a global tax overhaul. The specifics of this tax and subsidies, set to take effect next year, are still under discussion.