The USA has struck deals with Vietnam on semiconductors and critical materials as the country elevates Washington to Hanoi's highest diplomatic status.

The status is one previously reserved only for China, Russia, India and South Korea. Vietnam had long avoided the move for fear of upsetting Beijing, but the US has been pushing for the upgrade as it sees Vietnam as a key partner in its strategy to secure global supply chains amidst growing tensions with China and Russia.

The agreement includes a new US-Vietnam chip partnership to support resilient semiconductor supply chains for US industry, consumers, and workers and is set to help expand Vietnam’s semiconductor capacity in support of US business.

The countries also discussed strengthening the supply chains of critical minerals, especially rare earths. The rare earth value chain in Vietnam is largely focussed on refining, although the country recently announced ambitions to expand mining. The USA has the world’s largest rare earth mine outside of China, so the interest in Vietnam will likely target the established metal and magnet value chain which first established when Japan looked to diversify its own supply chains from China more than a decade ago. In the meantime, Chinese rare earth companies are continuing to expand ownership in Vietnam’s rare earth facilities.

 Vietnam also represents a key potential US partner for other critical materials. Antimony, for example, classified by the US as a critical material owing its use in military applications, is produced in Vietnam in a supply chain linked to Russian ore feed. Vietnam has quickly grown to be one of the major antimony metal producers outside of China, offering alternative supply of options for consumers looking to diversify away from China. 

Vietnam is looking to expand its potential as a low-cost manufacturing hub and with China maturing its economy more investments are likely to follow.