SEOUL – Vietnamese President Nguyen Xuan Phuc has become the first foreign leader to make a state visit to South Korea at the express invitation of President Yoon Suk-yeol, who took office in May.
During Phuc’s three-day visit last week – accompanied by a hefty delegation that included his foreign minister, trade and industry minister and planning and investment minister – the two nations announced a new “comprehensive strategic partnership.”
South Korea is already the largest foreign investor in Vietnam, building fro the two sides’ free trade deal signed in 2015. Now, as differing political forces compel South Korea and Vietnam to diversify away from, respectively, China and Russia, wider and more fruitful avenues of cooperation may lie ahead.
Yoon said that Seoul will support the strengthening of Vietnam’s capability to enforce maritime laws – code for supply of naval equipment – and expand cooperation in defense, as well as in the high-tech sector and in rare earths.
In the wake of a huge deal with Poland, Seoul is currently on an international arms-sales roll at what looks like a fortuitous moment. Vietnam, which has just hosted its first-ever international defense expo, is being required to diversify away from its customary weaponry supplier, Russia.
And at a time when semiconductor companies in nations allied to Washington are being forced to rethink their supply chain, investment and export strategies as decoupling with China looms, Samsung – which already makes smartphones and home appliances in Vietnam – is set to begin chip-related production in Vietnam next year.
Vietnam, like China, is a key source of rare earths, raw minerals widely used in high-tech components. The two nations also signed an agreement in that field.
China in the middle
In 2009, Hanoi and Seoul had announced a strategic relationship covering military cooperation and strategic dialog mechanisms, but the deal largely remained dormant. In 2017, Phuc asked Seoul’s then-foreign minister Yun Byeong-se to back Hanoi’s position on the South China Sea and assist with “law enforcement” in the area.
South Korea, then led by the progressive Moon Jae-in administration, was not keen to irk China, its largest trade partner. Now, the Vietnamese may be pushing on an open door given how the conservative Yoon administration is so focused on overseas defense sales.
The two Sinic-influenced nations, situated at opposite ends of the Chinese land mass, have mirror-image recent histories.
Both were divided nations; both fought bloody Cold War hot conflicts with direct US engagement. Complicating matters, South Korean troops fought effectively – but brutally – on the US side. North Vietnam successfully unified after its 1975 invasion of South Vietnam, while Korea remains divided.
Both nations have complicated relations with China. Vietnam, while a fraternal communist state, fought a border war with China in 1979 and territorial tensions between Beijing and Hanoi continue to simmer over Chinese naval expansionism in the South China Sea.
Korea fought against China during the 1950-53 Korean War, but after the two capitals opened diplomatic relations in 1992, China has become Korea’s largest trade partner.
However, with Washington and Beijing increasingly at odds, Seoul suffered collateral damage in the wake of the deployment of a US missile defense system in 2017. Now, under US pressure, its technology giants face are facing the prospect of decoupling their supply chains from China.
Given these complex dynamics, fruitful avenues for Hanoi-Seoul cooperation beckon.
Korean arms merchants spread their wings
Heavy international sanctions on Russia, Vietnam’s traditional arms supplier of everything from jet fighters to submarines, are complicating acquisitions of new tranches of weaponry from Moscow.
While Russian missiles have proven deadly in the ongoing war on Ukraine, the questionable performance of its ground, air and naval forces has not delivered a marketing windfall for its wares. And as battle rages, huge stocks of Russian military products are being burned through by domestic users.
South Korea looks well positioned to fill that vacuum, having this year signed its biggest arms deal ever, selling tanks, self-propelled guns, multiple launch rocket systems and jet fighters to Poland in a huge, country-to-country deal that has been valued at anywhere between US$9 billion and $15 billion.
The country offers NATO-standard weaponry and its manufacturing base is noted for both price competitiveness and efficient and timely execution.
“The Korean government is committed to contributing to maritime security in the region, we will actively support the strengthening of Vietnam’s maritime law enforcement capabilities and expand defense industry cooperation with Vietnam,” Yoon said during Phuc’s visit.
While South Korean vessels have not taken part in the “Freedom of Navigation Operations” (FONOPs) off Chinese-occupied and militarized islets and reefs in the South China Sea that the US and some Western navies have prosecuted, it has donated two decommissioned Pohang-class corvettes to Vietnam. They are currently being repurposed as specialist anti-submarine craft.
According to US Congress-funded media Radio Free Asia, Vietnam is also interested in South Korea’s KF-21 fighter yet and could make a buy if technology transfer is built into a deal. The KF-21, which held its first test flight this year, is a multirole fighter that retails at a lower price point than top-tier stealth jets such as the US-made F-35.
The two countries’ defense ministers held a bilateral defense dialog in Seoul in September, covering the arms industry, maritime security, military logistics and cybersecurity.
And Yoon’s personal interest in upgrading the local defense sector is clear. He has talked it up in the past, and on December 14 his cabinet approved the establishment of a new “Defense Innovation Committee,” to be chaired by the president himself.
Stars may be aligning to South Korea’s west.
From December 8-10, Vietnam opened its first international defense show, the VIDEX, or Vietnam International Defense Expo 2022, in Hanoi, hosted by the country’s Ministry of Defense. Though Russian defense companies were pitching their wares at “Vietnam Defense 2022,” visitors were told that Hanoi is seeking to diversify its arms supply sources.
“They stated that diversification was the goal by 2030,” a source in the sector who visited the expo and who spoke on condition of anonymity as he did not have permission to speak to media told Asia Times. “They did not say diversification away from Russia, but that was implicit.”
While Russian companies were represented at the show, the source – who admitted his surprise at how professional the show was given that it was the first Vietnamese experience in running one – noted the particularly high-profile presence of Indians and Israeli vendors.
“Vietnam prizes its independence and its degrees of freedom,” the source said. “They want to be seen as equidistant from everyone as they want to act in autonomous ways.”
Samsung chips away at Vietnam
During his state visit, Phuc met Samsung Electronics vice president Han Jong-hee, who announced that Samsung will increase its investments in Vietnam to some $20 billion.
Samsung has already invested $18 billion in Vietnam, largely for manufacturing smartphones and home appliances. To date, it has not invested in semiconductor production in Vietnam.
Currently, major uncertainties hang over the future of Samsung’s NAND memory chip fabs in China due to US policy pressures.
“As the US looks to put a limit on the number of shipments of chip-making tools to China, Vietnam rises as an optimum alternative destination,” according to a September report by Vietnam Briefing, “The addition of the South Korean giant is likely to foster the development of semiconductors’ related industries, as well as push forward the development of appropriate skillsets and expertise within the country.”
Samsung is Vietnam’s biggest single foreign investor, and in 2023, will expand its presence from phones and home appliances into semiconductor components, Vietnam Briefing noted. In August, it was announced that Samsung would begin trial production of its “flip-chip ball grid array” — a packaging technology used for chips – in Vietnam.
Samsung is not alone. In August, US chipmaker Synopsis announced an investment in the country, and other competitors including Qualcomm and SK hynix already have presences. Most chip firms operating in Vietnam are operating in the downstream end of the sector, such as packaging and testing, rather than the high-end practices of design and manufacturing.
This fits with Vietnam’s industrial base and its human resources’ skillsets.
“A couple of things the Vietnamese can do if they have the right investors are back-end assembly and packaging, which is heavily concentrated in Southeast Asia and China as wages are low,” added Scott Foster, a Japan-based semiconductor analyst and Asia Times columnist. “There are a lot of components that go into chip production that are not highly sophisticated nanometer-scale things, and Vietnam could make those kinds of things.”
Rare opportunity in rare earths
However, avenues of cooperation are not exclusively one-way.
China is currently the world’s largest supplier of rare earths, but if supply chains are cut, Vietnam – which is believed to have a wide, but so far unexploited supply of the materials – could help to fill the gap. Rare earths are used in the manufacture of multiple high-tech components, from superconductors to lithium batteries to electronic displays to electric motors.
“We share the view that there is great potential for cooperation between the two countries on the development of rare earths abundant in Vietnam and decided to seek concrete ways to cooperate on the sector,” Yoon said.
“China’s market share in rare earths is so high that cutting them off is not a practical option at this point, so what everyone is trying to do is diversify away from over-dependence on China,” added Foster. “There are two ways: One is to find another potential source of rare earths, the other is to develop technologies that reduce dependencies on rare earths.”
He suggested that for the Vietnamese, the first option would make sense, while ultra-high-value-added economies like Japan focus on the second.
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