The world's next big center for semiconductor production isn't going to be somewhere on the U.S. West Coast.
It won't be in South Korea, Taiwan, or somewhere in mainland China.
It will be Ho Chi Minh City, in an increasingly powerful Vietnamese tech economy…
The Spike in Production
Next year, the CPUs for 80% of the world's new PCs will be produced at an Intel Corp. (Nasdaq: INTC) plant in the Saigon Hi-Tech Park (SHTP) near Ho Chi Minh City.
The Intel Vietnam CPU line is the latest addition to a major chip assembly-and-testing plant that dates back to 2006. New system-on-a-chip (SoC) platforms for smartphones and tablets have been produced at the Vietnam plant since the beginning of this year. By the time the curtain falls on 2014, that portion of the plant will have churned out 40 million SoCs.
All of "these products will service customers from all over the world and have a positive impact on export turnover and the development of Vietnam high technology," Intel Vietnam CEO Sherry Boger told the Vietnam Investment Review.
She's right: This tale is about much more than a single plant.
In a story we've been following for you almost since its beginning, Intel first announced its Vietnam plant as a $300 million investment back in 2006. Just one year later, Intel more than tripled its planned investment to $1 billion.
The Intel Vietnam plant – the size of six football fields – became operational in 2010. It accounted for $1.8 billion in exports this year. And that total will surge in 2015.
So will the beneficial ripple effects – which underscore the big-time profit opportunity that Vietnam represents.
We've been talking about Vietnam's long-term investment potential for more than two years. In fact, our analysis grabbed some air-time attention on a "Voice of Vietnam" international broadcast.
Even Barron's – in a recent cover story – sees Vietnam as one of the world's most-promising profit plays.
We were a bit early with our "call" on Vietnam.
But we weren't wrong.
And our story about Intel underscores the massive upside we see from this emerging Southeast Asian economy.
Today we're going to share the rest of that story – and show you how to cash in.
Vietnam Is Now Planting the Seeds of Wealth
B.C. Forbes, the Scottish journalist who founded Forbes magazine, once said "it is only the farmer who faithfully plants seeds in the spring, who reaps a harvest in the autumn."
He's right about seeds leading to windfall harvests: That's the essence of investing – global or personal.
And Intel Vietnam is accelerating its planting – in hopes of reaping a financial bounty. For instance, the company wants to:
- Develop a local supply chain so it can "source" needed materials right in Vietnam.
- Establish strategic alliances and foster the kind of tech-sector network that will help Vietnam develop its own semiconductor industry.
- Work with Ho Chi Minh City to establish an education-and-training program for engineers and technicians for the semiconductor industry.
- Work through the parent company's Intel Capital venture-funding unit to invest in any companies that meet its Vietnam business growth strategy.
That last item is no small thing. According to market researcher CB Insights, since the start of 2009, Intel Capital has realized the highest number of deal "exits" – either mergers and acquisitions or initial public offerings (IPOs) – of any investor. Even the No. 2 and No. 3 venture firms – the Cisco Investments unit of Cisco Systems, Inc. (Nasdaq: CSCO) and the Motorola Solutions Venture Capital group – fail to come close.
These "exits" are the transactions (either buyouts or stock offerings) that let initial investors "cash out" and recoup their investment. In other words, an exit is like the Silicon Valley version of the Good Housekeeping Seal of Approval on a venture deal – and represents a successful investment, or financial harvest.
Over the last five years, Intel has done this better than anyone – even the venture-capital funds that invest in startups for a living.
During that five-year run, there were 22 corporate-venture or venture-capital investors that recorded 40 or more M&A/IPO exits. Intel Capital topped the list with 100 by itself.
So any venture investments Intel makes in Vietnam are certain to benefit that country's entire tech sector, and not just the chip giant.
Former Intel CEO Paul Otellini said his company "helped put Vietnam on the map for high-tech investment."
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.