Intel to open billion-dollar chip plant in Vietnam

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The world's biggest chip maker, Intel, will on Friday open in Vietnam a billion-dollar assembly and test facility billed as the company's biggest, as the country vies to move up the technology ladder.

Vietnamese government leaders and officials of the US firm will cut a ribbon to inaugurate the plant in Ho Chi Minh City four years after it was conceived.

The opening of the high-tech facility comes as analysts say communist Vietnam risks losing out both to poorer, lower-wage nations and richer ones that are more innovative and have a higher-quality labour force.

Vietnam's economy depends too much on exploitation of natural resources and its industry, often dominated by large state-owned groups, lacks dynamism, Vietnam's Academy of Social Sciences (VASS) and the World Bank said in a joint report in August.

The country is the world's second-largest exporter of rice and of coffee. Seafood, footwear and garment shipments are other key earners.

But the Intel facility is a sign that Vietnam is "moving up the food chain toward increasingly sophisticated manufacturing", said Adam Sitkoff, executive director of the American Chamber of Commerce Vietnam.

"Intel's investment in Vietnam is undoubtedly a vote of confidence" in the country, said Leon Perera, group managing director of Spire Research and Consulting in Singapore.

The investment proves that Vietnam is benefiting from the need of multinational companies to diversify beyond China, Perera said.

"Intel was the first major foreign high-technology investor in Vietnam and the factory... is the largest computer equipment and manufacturing plant" in the country, Intel says on its website.

The facility, one of seven worldwide, is projected to employ up to 4,000 people when it reaches full production of the chips used in personal computers, Intel says.

Sitkoff said these are "higher-quality jobs for Vietnamese people".

Intel says it aims "to develop a stronger digital workforce, integrate technology into education and government, and make technology more accessible for business and consumers within Southeast Asia."

Company executives were not available for interviews before the plant's opening.

Intel says the 500,000-square-foot (45,000 square meters) plant is its largest single assembly and test facility.

It could attract other high-tech firms to Vietnam, Sitkoff said.

"Usually when Intel goes somewhere, that's a sign to other technology companies that they can go there also," he said.

With its labour-cost advantage over China, closeness to the Chinese market, and participation in regional free trade pacts, Vietnam "may be well suited for assembly of IT products", Perera said.

When the Intel project was launched four years ago, Prime Minister Nguyen Tan Dung hailed it as a move that would encourage foreign investment "especially in the field of information and communication technology".

An obstacle could be Vietnam's relatively underdeveloped logistics industry, although this is being corrected by government and private-sector investments, Perera said.

"For some categories of products, the lack of a well-developed supplier base implies the need for import of key components, placing a burden on the logistics industry," he said.

"Another obstacle would be the relative scarcity of English speakers as compared to Malaysia, or even Thailand and China."

Vietnam's science and technology standards are low compared with regional rivals, VASS president Do Hoai Nam has said.

He added the country's economic infrastructure is not well-developed, there is a lack of specialization and competitiveness and a shortage of skilled workers.

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