HO CHI MINH CITY, Vietnam – Intel Corp. (INTC), the world's largest chipmaker, announced plans Tuesday to build a $300 million chip assembly and testing factory in southern Vietnam, giving a huge boost to the country's efforts to raise its high tech profile.
The facility, which will be built in Ho Chi Minh City's Saigon Hi-Tech Park, marks the single largest U.S. investment so far in its former wartime adversary. The deal is considered a significant one for Vietnam in its campaign to attract more foreign investors.
"We consider this to be one small step in a long journey of involvement with Vietnam," said Intel Chairman Craig Barrett at a formal ceremony where Vietnam's Ministry of Investment and Planning handed over the investment license.
Construction on the plant, which will employ 1,200 people, will begin immediately, he said, adding that production is slated to start in the second half of 2007. Barrett said he considers the facility to be only the first phase of Intel's investment in Vietnam.
Intel's investment license was approved for $605 million, and Barrett said he fully expects that if things go well, Intel will expand operations to a second phase.
"If we continue as we anticipate, we have the option to go up to $605 million," he said.
Vietnamese leaders are hopeful that Intel's move will put an international spotlight on the country's attractions as an investment destination. Vietnam last year had an annual growth rate of 8.4 percent, one of the highest in the region.
Marking the significance of the deal, Deputy Prime Minister Nguyen Tan Dung was among a host of Vietnamese dignitaries on hand for the ceremony, held at the Reunification Palace, the iconic spot where Communist tanks barreled through in April 1975, ending the Vietnam War.
But those days of conflict are long over, with current U.S.-Vietnam relations at its highest point in decades. Bilateral trade has been booming, topping $7.5 billion last year.
"For the Vietnamese IT (information technology) community, this is a big day — probably the biggest day because Intel's investment in Vietnam is the most promising signal for the development of the industry," said Truong Gia Binh, CEO and president of FPT, Vietnam's leading software and computer manufacturer.
"It shows the maturity of the environment for IT development in Vietnam and it will also open up a very bright stage of development for Vietnam in the years to come," Binh said.
The plant in Ho Chi Minh City will be the first semiconductor facility in Vietnam and the sixth testing facility in Asia for Intel. The Santa Clara, Calif.-based company has two plants in Malaysia, two in China and one in the Philippines.
Intel looked at many option to locate a new facility and Vietnam was chosen for several reasons, including its infrastructure, its young work force, and a growing education system, Barrett said.
Intel's decision to move to Vietnam will also help to bring other companies here, including suppliers and services, he said.
"When a major corporation like Intel chooses to relocate, the other corporations will follow," Barrett said.
Currently, about 260 U.S. firms, with a combined capital of $1.45 billion, have invested directly in Vietnam, according to government statistics.
In 2005, computer and electronic equipment exports from Vietnam rose 34 percent to $1.44 billion, while imports of computers and electronics rose 26.3 percent to $1.7 billion.