A Silicon Valley in Vietnam

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Intel's rising chip assembly factory catches eye of other tech firms

April 29, 2008|By John Boudreau | John Boudreau,San Jose Mercury News

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

The Santa Clara, Calif., chip giant jolted the tech world two years ago when it announced it would build a huge assembly factory in this Southeast Asian country known more for making shoes and growing crops than assembling key PC components. Intel Corp. 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, who is overseeing the 115-acre construction site in the new Saigon Hi-Tech Park. By the end of 2009, chip sets (pairings of more than one computer chip used for specialized tasks) are expected to roll off the assembly line to feed the company's 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 and design facilities, which created 10,000 jobs.

More recently, Intel began construction of 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 ABC's 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 work force, proximity to China and the government's bend-over-backward policy to attract powerhouse multinationals.

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 be host to a conference for more than 200 tech vendors, some of whom are expected to set up operations in Vietnam.

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.

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 assemble them into chip sets 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, said 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 vociferously 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."

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