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How does the Semiconductor Chip Shortage affect Vietnam’s Automotive Industry?


Since late 2020, the global semiconductor chip crisis has caused shortages in the automobile industry, particularly in Vietnam, affecting the supply chain and resulting in delays and fewer the number of new cars being introduced to the market.

semiconductor chip

The Role of Semiconductor Chips in the Automotive Industry

“Semiconductor chips are essential to the development of modern life”, as FPT Semiconductor has emphasized. They are found in a wide range of electronic devices, appliances, medical equipment, and automobiles. Specifically in the automobile industry, semiconductor chips are being incorporated into a growing number of vehicle models. One model can contain various semiconductor-chip-containing modules, such as driver assistance systems and engine control units (ECUs). On average, a car contains hundreds of semiconductor components comprising approximately 1,400 different chip types.

In traditional combustion engine vehicles, manufacturers have gradually shifted towards electronic control, and automation, all of which necessitate the use of semiconductor chips. For instance, the Electronic Control Unit (ECU) is equipped with at least 4-5 chips for all sensor inputs, outputs, RAM, and ROM memory. Integrated Circuits (ICs) use 2-3 semiconductor chips to perform digital technology-based measurement tasks. The Digital Meter Cluster (MFD) utilizes at least one processor, along with integrated RAM, ROM memory containing semiconductor chips. Similarly, the car stereo system also employs at least one processor, RAM, ROM, and various other semiconductor chips to handle tasks such as audio, GPS, Bluetooth, WiFi, USB, and external devices.

In modern car models, from standard to upgraded versions, almost all utilize dual-zone independent air conditioning and electronic adjustments instead of mechanical adjustments as before. To achieve this, a combination of 1-2 processors and supporting chips is used to manage the cooling system, heating system, and automatic fan speed control based on the vehicle’s internal temperature. Even safety systems such as ABS brakes are equipped with 1-2 semiconductor chips to assist in braking processes, controlling slipping, and stabilizing the vehicle when braking.

semiconductor chip

For vehicles employing numerous advanced technological functions, such as electric or hybrid cars, the number of semiconductor chips required is even larger, reaching up to 3,000 chips.

However, in Vietnam, there are currently no enterprises capable of producing a complete semiconductor chip, including the stages of research, design, manufacturing, packaging, etc. Vietnamese semiconductor enterprises are only engaged in research and design phases. Therefore, the majority of semiconductor chips used in automobile production and assembly must be imported from leading global corporations such as NVIDIA, Intel (USA), TSMC (Taiwan), Samsung (South Korea),…

The dependence on semiconductor chip supply sources from abroad has led to numerous limitations when the global semiconductor chip crisis erupted. The global automotive industry, including Vietnam, particularly electric vehicle (EV) manufacturers, will have to face new crises of component scarcity, production delays, reduced numbers of new cars, price fluctuations,… until semiconductor chip supply returns to its stable state again.

Impact of the Semiconductor Chip Crisis on the Automotive Industry in Vietnam

October 2022 was when the automobile sector released the most statements regarding the effects of the semiconductor chip crisis, which has persisted for more than two years without showing any signs of ending. It was not until late 2023, to early 2024, that the global semiconductor market started to rebound.

The shortage of semiconductor chips has caused numerous automotive brands in Vietnam to postpone delivery times by several months. Not only imported cars but also locally assembled ones have been affected, with some manufacturers even reducing the number of new cars introduced to the market. This scarcity has also led to price hikes. Some significant cases:

  • The VF e34 electric car by VinFast postponed the delivery of vehicles. During the ceremony for the first batch of VF e34 electric cars at the VinFast factory (Hai Phong) at the end of 2021, VinFast announced that it intended to deliver thousands of VF e34 cars to customers who had made deposits by January 2022. However, in the first two months of the year, only 93 VinFast VF e34 electric cars were sold. VinFast attributed the shortage of components as the reason for the impact on the production schedule and delivery of VF e34 electric cars to customers.
  • On the other hand, Hyundai Tucson experiences another situation. The disruption in the supply chain affected the volume of cars introduced to the market. As a popular model, scarcity caused product price fluctuations and sales policies. For a long time, the prices of new-generation Tucson models were inflated by dealerships, with a margin of nearly 100 million VND compared to the listed price. Specifically, prices increased ranging from 35-100 million VND (on the original price of 825 million VND for the basic model and 1,030 billion VND for the advanced model), or dealerships bundled cars with mandatory accessory packages for popular models.
  • Regarding Honda and Toyota brands in Vietnam, both hold the view that the chip shortage is a global issue, causing many manufacturers to temporarily halt or reduce the production of new cars. However, the current shortage of semiconductor chips has not impacted the manufacturing and assembly operations of these two companies in Vietnam, so the supply of cars to the market is still ensured and delivered on time, although fully imported models require longer waiting times.
  • The CEO of Suzuki Vietnam shared that the domestically manufactured models of its joint venture, including the Carry Truck, Blind Van, and imported cars such as Swift, XL7, Ertiga, and Ciaz, are affected by the shortage of chip supply. However, Suzuki Vietnam is striving to ensure the supply of raw materials to meet production and market demand.

Rebound Potential of the Semiconductor Industry – Promising Signs for the Vietnam Automotive Industry

Following the COVID-19 pandemic, US-China trade issues, surge in high-tech industries, and electric engine vehicles, the semiconductor chip “flow” was disrupted by significant shortages. However, since the second half of 2023 and early 2024, the global semiconductor sector has received consistent positive growth signals. The semiconductor sector is more vibrant than ever, with industry “giants” extending their investment to promising lands such as Hsinchu (Taiwan) and Arizona (USA), with startling expenses of billions of USD.

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No longer a bystander, Vietnam has been chosen to become a “new manufacturing hub” globally, with many investment attraction policies, key projects, FDI enterprises setting up manufacturing bases with investments upto millions of USD, and semiconductor talent development policies being pushed to the forefront.

In this context, semiconductor industry experts also predict that 2024 will be the revival year of the semiconductor industry and the entire economy as a whole. We can also trust that the vision of the Vietnamese automotive industry will return to vibrant growth and even surpass the pre-crisis period.