Vietnam emerges as major market for Korean chipmakers

The Korea Times

The Korea Times

Finance

Tue, October 3, 2023 | 15:42

Economy

Vietnam emerges as major market for Korean chipmakers

Posted : 2023-05-29 16:11

Updated : 2023-05-30 16:22

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By Lee Yeon-woo

Vietnam is quickly emerging as a major market for Korean semiconductor makers, which have been struggling amid sluggish chip demand in China, according to a report by the Bank of Korea (BOK), Monday.

The BOK stressed the importance of diversifying export markets for Samsung Electronics and SK Hynix in light of the escalating rivalry between the U.S. and China.

"Vietnam is emerging as a new source of demand for Korean semiconductors, as it rises as an international production base for information technology (IT) devices that could potentially replace China in the future," the report wrote.

"In particular, Vietnam is now home to major smartphone manufacturers' production bases. Korean semiconductors are used as intermediary goods in Vietnam to produce finished IT goods," the report added.

The report noted that Vietnam's abundant low-wage workforce and high accessibility to the Chinese market are prompting global businesses, including those from Korea, to build manufacturing facilities in the Southeast Asian country.

For instance, Samsung Electronics relocated its smartphone and computer production bases to Vietnam from 2018 to 2020. Apple also moved parts of its iPad production lines from China to Vietnam last June, while Google is also considering such a relocation.

The revival of Vietnam's economy is another encouraging factor. While its economy had slowed during the COVID-19 lockdown, it rebounded sharply and achieved 8 percent growth last year. Also, the Southeast Asian country generated the largest trade surplus for Korea last year.

As of 2022, China accounted for 55 percent of Korea's semiconductor exports, followed by Vietnam at 12 percent, Taiwan at 9 percent, and the United States at 7 percent. The U.S. showed the greatest decline of 68.6 percent in terms of export demand this April compared to the same month in 2022.

However, the bank forecasts Korea's semiconductor market to be significantly influenced by China and the U.S., due to a heavy reliance on those markets. The BOK predicted that an increase in Chinese smartphone consumption and a recovery in U.S. data center investments will determine the market shares of the Korean semiconductor makers.

"Considering the higher volatility of Korea's semiconductor market, it is necessary to reduce market fluctuations by strengthening competitiveness in the non-memory chip sector and diversifying sources of demand," the report said. "Additionally, strategic responses are needed to minimize the negative impact caused by conflicts between the U.S. and China, which represent the largest proportion of domestic semiconductor demand."

yanu@koreatimes.co.kr