According to reports citing sources familiar with the matter, Intel Corp. is thinking about significantly increasing its current $1.5 billion investment in Vietnam to expand its chip testing and packaging facility there.

As businesses push to reduce reliance on China and Taiwan due to political risks and trade tension with the United States, the potential move, which one source estimated could be worth about $1 billion, would signal a growing role for Vietnam in the global supply chain for semiconductors.

The investment, according to one of the sources, will probably be made “over the future years” and may even be more than $1 billion. The second source claimed that Intel was also considering alternative investment opportunities in Singapore and Malaysia, which may be preferred to Vietnam.

The sources were not named in the reports.

When asked about the potential investment scheme, Intel told the media that Vietnam was a crucial component of its global manufacturing network but that it had not yet made any new investment announcements.

On Wednesday, a statement posted on the official website of the Vietnamese government was changed to remove a mention of Ho Chi Minh City’s efforts to persuade Intel to invest an additional $3.3 billion there.

The largest manufacturing facility for Intel’s chip packaging and testing is located in Ho Chi Minh City. It is thought to have made so far investments in the amount of $1.5 billion.

One of the sources told Reuters, citing internal discussions, that the American chip giant already has extra land where its plant is located, and an expansion in Vietnam would help it better manage supply disruptions caused by relying too heavily on a single country or a plant.

One of the sources claimed that Intel was considering the Vietnam investment while ensuring that any future international expansion would not be viewed negatively by Washington, which is pushing to increase domestic chip production.

According to officials, Vietnam is actively pursuing foreign companies in all three of the major chipmaking industry segments—assembling, testing, and packaging; manufacturing with fabs; and designing.

According to a US industry executive, the nation has a great deal of potential to expand rapidly in chip assembling and designing, but creating chip manufacturing fabs is a long shot, with the possible exception of cheaper-to-build fabs for less sophisticated, bigger chips that are still in high demand, like those used in cars.

According to the executive, Vietnam’s biggest opportunity is in the chip assembling sector to meet industry demand and reduce “over-concentration” of production capacity in China and Taiwan, which account for 60% of global capacity in that segment.

Designing chips demands less capital and more highly skilled workers, and Vietnam is making headway there as well, according to the executive, with US giant Synopsys owning operations there and local firms like FPT and state-owned Viettel expanding rapidly.

Samsung opened a research facility in Hanoi late last year and operates a semiconductor packaging plant in the country.

Following a global shortage of semiconductors as a result of the COVID-19 pandemic, Intel announced a plan to invest more than $7 billion in a new chip packaging and testing factory in Malaysia in late 2021.

That plant is expected to start production in 2024. In addition, Intel has testing and packaging facilities in both China and the United States.

(Adapted from Reuters.com)