[Vnbiz] Intel reshaping Vietnam with billion-dollar chip-assembly plant

[Tai Phan]

Intel reshaping Vietnam with billion-dollar chip-assembly plantBy John
Boudreau
Mercury News<jboudreau at mercurynews.com?subject=San%20Jose%20Mercury%20News:%20Intel%20reshaping%20Vietnam%20with%20billion-dollar%20chip-assembly%20plant>
Article Launched: 04/17/2008

 HO CHI MINH CITY, Vietnam - Intel's billion-dollar Vietnam bet along the
Hanoi Highway - its biggest semiconductor manufacturing plant ever - is
rising up from the flatlands of former rice fields.

The Santa Clara chip giant jolted the tech world two years ago when it
announced it would build a massive assembly factory in this Southeast Asian
country known more for making shoes and growing crops than assembling key PC
components. Intel picked Vietnam, a nation of 85 million that lacks a single
world-class university, over India, whose army of engineers has reordered
the global software industry.

"We are not afraid to be first," said Rick Howarth, Intel's lanky general
manager overseeing the 115-acre construction site in the new Saigon Hi-Tech
Park. By the end of 2009, chipsets (pairings of more than one chip used for
specialized tasks) are expected to roll off the assembly line to feed the
company's massive global supply chain from a complex that will equal the
size of nearly nine football fields and employ about 4,000 workers.

The project, dubbed A-9 - nine is an auspicious number in Vietnam - is
emblematic of Intel's muscular role as an iconic industry leader that can
influence the fortunes of nations merely by deciding where it will plant its
next factory.

In Malaysia, which 35 years ago became Intel's first site outside the United
States, the company helped to create a tech ecosystem with its $3.3 billion
investment in testing, assembly
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and design facilities, which created 10,000 jobs.

More recently, Intel began construction on a $2.5 billion wafer fabrication
facility in the northeastern Chinese city of Dalian, a project Chinese
officials hope brings high tech to a high-unemployment region with more
pollution than opportunity.

In Vietnam, Intel's decision to open a new global outpost involved an
exacting process, from analyzing the country's educational curriculum to
secret negotiations with government officials still learning the ABCs of
market economics.

Years of on-the-ground investigating by a crack team of company experts -
and a cross-Pacific courtship by Hanoi - led to the decision to roll the
dice in this developing country. Vietnam's attractions include a young,
low-cost workforce, proximity to China and the government's
bend-over-backward policy to attract powerhouse multinationals.

'Stamp of validation'

Though the project is now only a skeletal building, Intel is already
changing Vietnam. Its surprise move is creating new investments and interest
in this country from other global giants. In June, Intel will host a
conference for more than 200 tech vendors, some of whom are expected to set
up operations in Vietnam.

"They see Intel as a stamp of validation. Every month, I probably speak with
two CEOs of multinational companies evaluating Vietnam," Howarth said.

And the government is giving the company unprecedented access to
high-ranking officials in this increasingly capitalistic communist country.
Intel executives are treated like high-ranking diplomats from important
nations.

"Any time I go to Hanoi, I can get time with the prime minister," Howarth
said matter-of-factly. "That's how important we are to them. He always asks,
'Are you on schedule?' They are rolling out the red carpet for Intel."

Intel also enjoys a "don't touch" status in a nation where bribery is
common, observed company country manager and former Silicon Valley resident
Than Trong Phuc. "We don't see the corruption," he said.

Assembly and testing

Intel's Vietnam operation requires significantly less engineering prowess
than is needed in its U.S. chip factories, because the plant won't make
chips: It will just assemble them into chipsets and test them.

But for Vietnam, the plant will provide desperately needed professional jobs
for its youthful and work-hungry population. And it will give a huge boost
to its efforts to create a higher-end manufacturing base beyond garment and
other basic blue-collar assembly lines.

"We now can say, 'We have Intel inside,' " said Le Thi Thanh My, an official
with the People's Committee of Ho Chi Minh City, a local governing
authority. "The ripple effect of Intel coming here is now being felt. It has
been very successful."

My, who participated in the arduous talks with Intel, admitted the process
was far more extensive than Hanoi anticipated.

When a delegation led by Nguyen Tan Dung, now Vietnam's prime minister,
visited Intel's Santa Clara headquarters in 2001, the U.S. State Department
alerted local police to block off roads for fear the visit would set off
protests by the valley's vociferous anti-communist Vietnamese-American
community.

Phuc, who played a key role in negotiations, now enjoys almost rock-star
status in Hanoi.

"I couldn't imagine coming back to Vietnam, let alone being a part of
something that is changing the face of Vietnam," said the longtime Intel
executive, who fled the Southeast Asian country as a teenager in 1975,
climbing aboard a helicopter atop the U.S. embassy hours before the
communist forces conquered Saigon.

Now he's a Silicon Valley ambassador to the country. "I play the role of
filling the cultural gap between the two sides," Phuc said. "I'm able to
articulate to the government what Intel needs."

Intel is providing officials a blueprint of what is required to build a tech
industry. The company's requests for information were relentless, recalled
My, who is vice president of the Saigon Hi-Tech Park.

'A clean field'

Intel sifted through Ho Chi Minh City crime reports, sent representatives to
examine what students are taught in school, reviewed traffic congestion and
even requested data on the average size of Vietnamese adults to better
outfit its factory.

"To them, Vietnam is a clean field, a completely new area for investment,"
My said just before a power outage hit, a reminder of the many obstacles,
including lack of infrastructure, the country faces as it strives to become
a global tech player.

"We see the need to move quickly," she admitted in a suddenly darkened
office.

Intel knows it faces a tough challenge helping Vietnam upgrade its
industrial base. The biggest worry is finding enough qualified engineers.
The company recently tested 2,000 graduating Vietnamese students. Only 90
were able to score at least 60 percent on the standard exam, and half of
those failed an English competency review.

"There are numerous universities in the country, but the quality of students
they are putting out are not sufficient to meet the needs of the high-tech
industry," Howarth said. "Their curriculum is antiquated. Their teaching
methods are very hierarchical, meaning it's all memorization and passing
tests, vs. the practical application we're looking for."

The company also is bringing its culture to Vietnam. It sponsors
team-building exercises like karaoke Fridays. Executives work alongside
rank-and-file employees - no big offices for the big bosses - a stark
contrast to Vietnam's pecking-order work culture.

"When I went to Intel's Santa Clara office, I saw some guys wearing shorts,"
said Bui Tan Dat, one of Intel's new Vietnamese engineers. "I'd never seen
that before."

Vietnamese view Intel's decision to come to Ho Chi Minh City with patriotic
pride and as another sign of their nation's economic emergence. Every
morning, company buses shuttle workers along the highway northeast of
central Ho Chi Minh City, a lurching, horn-honking journey that passes
low-slung shacks.

Vy Bui, a 23-year-old control analyst riding the bus one recent morning,
said she had numerous job offers from multinational companies before
choosing Intel, which was her parents' preference.

"Their decision counts," she said, but added, "I also wanted to work for
Intel."

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*Contact John Boudreau at jboudreau at mercurynews.com or (408) 278-3496*
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