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Good Morning Vietnam

Good Morning Vietnam
by Paul McLellan on 08-03-2015 at 7:00 am

 This morning I went to a presentation in Palo Alto about outsourcing in Vietnam. You have probably heard that Vietnam is the new China for manufacturing, as wages have increased in the Shenzhen area then companies like Foxconn have opened plants in Vietnam. But this meeting was mostly about services, software and design. In this area, perhaps Vietnam is the new India. The meeting was organized by VNITO the Vietnam Information Technology Outsourcing Organization.

The main presentation was by Hung Ngyen of LogiGear who do software testing, especially for the videogame industry. Somewhat confusingly there was a second Hung Ngyen from Microchip. Everyone seemed to have been at high school with Tom Quan of TSMC! The numbers for Vietnam are impressive: it is often ranked #1 emerging market location based on business conditions, risk and cost. Ho Chi Minh City (HCMC, the old Saigon) and Hanoi are in the top 20 outsourcing cities. It is not even on the radar yet for these types of studies, but Da Nang is an up and coming hub investing billions in infrastructure. For engineering graduates, Vietnam is in the top 10 countries. Perhaps more to the point, the talent pool is likely to continue to outstrip demand for years meaning that companies that move there now can pick from the top 10-20% of graduates. The deep pool also means that outsourcing organizations are very scalable, start small and grow.

 It is a young country. LogiGear’s local manager is about 30, and the team of around 800 people is split roughly 50:50 male and female. It seems that intracompany marriage is pretty common and, unlike in the US, is even encouraged. The speakers all figures that they were building the first layer of a middle class in the country. It is not insignificant. There are 100K software engineers in Vietnam and about 50K other digital content providers (web designers, graphic designers for video games etc).

The three big worries people have about outsourcing to Asia are:

  • cultural fit
  • language
  • IP protection

Cultural fit turns out to be surprisingly good. Presenting companies pointed out that it is a proud culture which means that people there are prepared to push back when, for example, a product is not ready for release. EA’s experience in Canada and Argentina was less successful than in Vietnam, where engineers will follow processes but not completely blindly. American companies seem to have no problem working closely with their Vietnam teams.

English is similar to China. Hung tried to claim that English was as good in Vietnam as India since they talk too fast with too strong an accent there. But the educated classes in India speak English since not everyone speaks any other language, they are all to some extent local. Plus their studies were all in English too.

As to IP protection, the risk is objectively much lower since there is no market for stolen IP in Vietnam in the same was as there is in China. Nobody seemed to have had any problems. They also don’t have a culture of pirating the software that they use.

In the semiconductor world, Intel is there. Samsung has just recently picked Vietnam. Renasas has operations there. But one company I knew about was eSilicon. I talked to Deepak Sabharwai, the VP Engineering for IP which is mostly in Vietnam. In fact most of eSilicon is in Vietnam. Out of 500 people in the company, 300 are there at two sites, HCMC and Da Nang.

eSilicon got into Vietnam when they acquired Silicon Design Systems. They focus on memory design since they want to have a good selection of differentiated IP, to separate them from their competition, but not so much that they are competing with their customers. Since memory is regularly half the real-estate on a chip it makes sense to specialize in that to have both standard IP and deep knowledge to create custom memories too. They also do custom ASIC design work there. They have around 250 people working on design.


They also do all their software Q/A there, with another 50 people. The team has done a great job of creating and automating the tests for both the customer-facing STAR suite and the enterprise software that they use internally to run the company. Software engineers can be hired from school but for memory design they hire smart graduates and train them internally. And they train them to a high standard, doing 14/16nm FinFET memories for example.

Deepak confirmed what the breakfast meeting had said. Cultural fit was good, the senior people speak good English but not everyone speaks so well. And they have all their IP development over there so don’t consider IP theft a major risk. Deepak, who worked for Cadence in india, said he felt Vietnam is now where India was 15+ years ago.


If you are seriously interested in considering operations in Vietnam, then there is a 3 day conference Vietnam, an Emerging Destination for IT Outsourcing from 14th to 17th October. There will be IT outsourcing companies, multinationals, technical universities and more. The conference will be held in The Reverie Saigon at Times Square in HCMC Vietnam. Details are here.

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