South Korea’s $3.5 Bn Chip Fund Puts Vietnam Supply Chain in Focus

South Korea is putting Won 5 Tn ($3.52 Bn) behind chip designers, equipment makers and suppliers as its semiconductor network expands into Vietnam, where Samsung Electronics and other Korean companies are adding capacity, and Hanoi is trying to move beyond assembly into higher-value chipmaking.

The fund will target semiconductor materials, parts, equipment and fabless companies, while the government will provide another Won 5 Tn in trade finance for export-oriented suppliers. Seoul is also setting aside Won 1 Tn for a 10-year programme linking large chipmakers with smaller companies across development, testing and production.

The measures are aimed at South Korea’s domestic semiconductor industry, and the government has not said the money will finance overseas projects. For Vietnam, the significance lies in the potential expansion of the Korean supplier base at a time when the country is becoming more deeply embedded in that production network.

Samsung is investing $1.5 Bn in its first semiconductor testing plant in Vietnam, expanding its manufacturing presence that has primarily focussed on smartphones and consumer electronics until now. The facility, currently under construction in Thai Nguyen province, north of Hanoi, is expected to begin operations in November 2027.

The plant will test DRAM and NAND memory chips, segments facing tighter supply as chipmakers divert more manufacturing capacity towards higher-end products used in artificial intelligence data centres.

Samsung has already committed more than $23 Bn to Vietnam, making the country one of its biggest manufacturing bases outside South Korea.

Other Korean suppliers are moving in the same direction. Hana Micron is investing about Won 1.3 Tn, or roughly $930 Mn, through 2026 to expand semiconductor packaging operations in Vietnam after customers sought production capacity outside China. Intel operates its largest global backend chip factory in the country, while Amkor Technology has committed $1.6 Bn to an advanced packaging facility.

The build-out is strengthening Vietnam’s position in assembly, testing and packaging, the less capital-intensive backend of semiconductor production. Its share of global capacity in that segment is projected to reach 8-9% by 2032 from about 1% in 2022, according to estimates from the Semiconductor Industry Association and Boston Consulting Group cited by Reuters.

Hanoi wants to capture more than that. Its state-owned Viettel began construction in January on Vietnam’s first semiconductor fabrication plant at Hoa Lac Hi-Tech Park outside Hanoi, with trial production targeted for late 2027. The project would add wafer fabrication, a technologically more complex stage of the semiconductor chain that Vietnam does not currently perform domestically.

South Korea is emerging as an important partner in that shift. President Lee Jae Myung and Vietnamese leader To Lam agreed in April to deepen co-operation in semiconductors, AI and supply chains, including support for Vietnamese companies seeking to participate in South Korean production and distribution networks.

South Korea is already Vietnam’s largest foreign investor, and the commercial relationship is beginning to extend beyond manufacturing. During Lee’s visit, the Korea Chip Design Industry Association agreed to work with Vietnamese technology group FPT on next-generation semiconductor technology, part of 73 business agreements signed between companies from the two countries.

The shift comes as South Korea accelerates an investment cycle of its own. In June this year, President Lee unveiled more than $576 Bn of planned semiconductor investment involving Samsung, SK Hynix, suppliers and local governments, including new fabrication capacity intended to reinforce the country’s position in memory chips and AI-related semiconductors.

That scale also raises the stakes for the companies surrounding South Korea’s two chip champions. The new Won 5 Tn fund and supplier programme are designed to give materials, equipment and chip-design businesses more capacity to grow alongside Samsung and SK Hynix, while the separate trade-finance pool targets companies selling overseas.

For Vietnam, the opportunity is to capture more of that outward-moving supply chain without remaining confined to its lowest-value stages. South Korean investment has already helped turn the country into a major electronics manufacturing base. Samsung’s testing plant, Hana Micron’s expansion and the new links with Korean chip designers suggest semiconductors are becoming the next layer of that relationship.

The more difficult question is whether Vietnam can turn foreign-owned factories and partnerships into domestic capabilities in design, fabrication and advanced packaging. South Korea’s latest chip push will strengthen the ecosystem around its own national champions. How much of that growth takes root in Vietnam will help determine whether Southeast Asia moves further up the semiconductor value chain or remains largely the production base beneath it.