Kenno Vietnam Pulse | September 2024

As Vietnam continues to thrive among Asia’s top destinations for foreign investment, Kenno remains committed to keeping its global audience informed about key developments through the 'Kenno Vietnam Pulse' series. In September 2024, Vietnam focused on quickly regaining economic momentum following the temporary disruptions caused by Typhoon Yagi. The high-tech sectors, including semiconductors and artificial intelligence (AI), along with national infrastructure development, continued to see positive progress.

Macroeconomic Highlights

 

In September, Vietnam’s economy was temporarily disrupted by the impacts of Typhoon Yagi. By mid-month, export value growth had slowed to 14.8% year-on-year (YoY), compared with 16% growth in the first eight months of 2024 (8M2024). Vietnam’s Manufacturing PMI also declined to 47.3 in September, down from 52.4 in August, due to production delays caused by extreme weather conditions. However, we are confident that this impact will be short-lived, as our team has observed strong momentum in both the manufacturing and export sectors since early 2023.

Vietnam's strong export momentum since January 2023.
Source: Vietnam Customs

 

 

In the financial market, the Vietnamese dong (VND) continued its recovery, in line with other emerging market currencies. Its value increased by another 1% against the USD in September, contributing to a 3% gain over the July-September period. The VND ended the month with only a 1.3% year-to-date (YTD) loss against the USD. With less pressure from the USD, we believe the State Bank of Vietnam (SBV) will have more flexibility to support the economy, especially in the aftermath of Typhoon Yagi. The SBV reduced the Open Market Operations (OMO) rate from 4.25% to 4% per year on September 16th. This was the second policy rate cut in 2024; the first occurred on August 5th, when the SBV lowered the OMO rate from 4.5% to 4.25% per year.

Vietnam Aims to Become Global Semiconductor Hub

 

On September 21st, Vietnam issued a new development strategy for the semiconductor industry under Decision No. 1018/QĐ-TTg, approved by Prime Minister Pham Minh Chinh. The strategy outlines a three-phase roadmap for semiconductor growth through 2050.

 

In the first phase (2024-2030), Vietnam will focus on training a highly skilled semiconductor workforce while attracting FDI to establish at least 100 design businesses, 10 packaging and testing factories, and one small-scale chip manufacturing plant. With these goals, alongside the production of specialized products, the sector is expected to exceed $25 billion in annual revenue, with added value reaching 10-15% during this period.

Semiconductor factory workers in Vietnam. (Image for illustration purposes only)
Sources: Hanoi Times

 

 

In the second phase (2030-2040), Vietnam aims to combine foreign investments with domestic resources to form at least 200 design businesses, 15 packaging and testing factories, and two chip manufacturing plants. By this time, the sector is expected to surpass $50 billion in annual revenue, with added value reaching 15-20%.

In the third phase (2040-2050), Vietnam aspires to become a significant global player in semiconductors and electronics, with at least 300 design businesses, 20 packaging and testing factories, and three chip manufacturing plants. Eventually, the sector is expected to exceed $100 billion in annual revenue, with added value reaching 20-25%.

This comprehensive strategy aims to establish an independent semiconductor ecosystem in Vietnam, positioning the country to take a more prominent role in certain stages of the global supply chain. Foreign investment in the industry, especially over the next 15 years, will be a selective and key driving factor in enabling Vietnam to achieve this goal.

Enhancing Vietnam-US Cooperation for Semiconductors and AI

 

On September 22nd, Vietnam’s Party General Secretary and State President To Lam attended a seminar in New York focused on bolstering collaboration between Vietnam and the United States, particularly in the semiconductor and AI industries.

The seminar also welcomed several world-renowned players in high-tech fields, including Google, AMD, Marvell, the U.S. Semiconductor Industry Association (SIA), and the Global Semiconductor Alliance (SEMI). Leaders and experts from these organizations shared their experiences in semiconductor and AI development, suggesting various potential areas for collaboration with Vietnam.

Vietnam’s Party General Secretary and State President To Lam (left) attends the seminar.
Source: Vietnam News Agency

 

 

According to Mr. Lam, Vietnam is transitioning towards a digital and sustainable economy, hosting many international high-tech enterprises such as Samsung, Amkor, Hana Micron, Intel, Foxconn, and LG. Strengthening the Vietnam-US partnership in the semiconductor and AI sectors is seen as a strategic and highly beneficial move, opening up numerous opportunities including the growth of supporting industries.

This deeper level of collaboration is also supported by Vietnam’s growing focus on high-tech industries and workforce development. The recent establishment of a national steering committee for the semiconductor industry and the implementation of an AI development strategy since 2021 demonstrate the country's commitment. By 2030, Vietnam aims to train 50,000 engineers, becoming a global hub for high-tech human resources.

Long Thanh International Airport Fast-Tracked for Completion by 2025

 

On September 24th, Vietnam’s Prime Minister Pham Minh Chinh called for the Long Thanh International Airport project to enter a 450-day emulation campaign. This initiative aims to accelerate the project toward basic completion by the end of 2025, nearly a year ahead of the initial schedule.

With a total investment of over USD 16 billion, construction of the Long Thanh International Airport began in 2021 as part of the first of three development phases. The current Phase 1, valued at USD 5.4 billion, will introduce a runway, a passenger terminal, and two supporting facilities, with operations set to begin in 2026.

Long Thanh International Airport’s construction site pictured in June 2024.
Source: VnExpress (Phuoc Tuan)

 

 

In terms of capacity, Long Thanh Airport’s Phase 1 is designed to serve 25 million passengers annually, increasing to 50 million in Phase 2, and ultimately 100 million in Phase 3. Currently, Vietnam’s other major international airports, including Noi Bai in Hanoi and Tan Son Nhat in Ho Chi Minh City, can respectively accommodate 30 million and 25 million passengers per year.

Since construction began, the project has progressed smoothly Despite a challenging start during the COVID-19 pandemic. The local authority, Dong Nai Province, has now secured 99% of required land area and while arranging for the resettlement of displaced residents.

The Long Thanh International Airport is one of Vietnam’s key priorities for future-proofing its transport infrastructure, designed to meet global standards. In addition to promoting tourism, it will also play a significant role in attracting FDI and boosting air cargo exports on a national scale.

Stay in the know!

And that’s a wrap for this month’s edition of Kenno Vietnam Pulse. We hope you enjoyed reading and found valuable insights into Vietnam’s market landscape. Feel free to subscribe to our monthly newsletter more timely, factual, and actionable updates.

Should you need a closer look at investment opportunities in Vietnam, we invite you connect with us for more information and tailored advice.

Laura Ranin

Disclaimer:

This document is prepared by Kenno Asset Management Pte. Ltd. ("Kenno"), the investment advisor for the Asia Top Picks Fund which is open only to professional investors. This marketing communication does not constitute investment advice. Please refer to Kenno’s official fund documents before making any final investment decision.

The information provided in this document is accurate as of the time of writing. Kenno does not guarantee the ongoing accuracy or completeness of this information and is not responsible for updates or changes after publication.