ASEAN’s Foray into Semiconductors
Semiconductors have become a vital part of modern technology, lying at the core of virtually everything from smartphones to self-driving cars. According to data from World Semiconductor Trade Statistics (WSTS), the global semiconductor market will reach USD 588.4bn in 2024, growing at a solid 13.1% y/y, with the Asia Pacific region accounting for the bulk of USD 317.5bn, rising by 12% y/y.
The ASEAN bloc of countries, in particular, has the potential to become a key global semiconductor hub, supported by strong government backing, a beneficial business environment, increasing manufacturing capacity, and a highly skilled workforce.
According to a DBS Bank report, Singapore has an 11% share of the global semiconductor market and manufactures about 20% of semiconductor equipment. Semiconductors contribute 7% of the country’s GDP and make up 80% of its electronics manufacturing output, the report claims. The country has made significant investments in R&D and talent development to create a supportive industry environment. The semiconductor industry in Singapore also enjoys regulatory perks such as lower tax rates and eased regulations, which makes it an attractive investment destination. The semiconductor industry lies at the core of the Singapore Economy 2030 vision, which envisages a 50% expansion of the manufacturing sector by 2030.
As per data cited by the ASEAN Business Briefing, Malaysia accounts for 13% of the global market for packaging, assembly, and testing services for semiconductors and is the sixth-largest semiconductor exporter globally. Malaysia is currently in the process of developing its semiconductor industry to include more value-added production such as wafer fabrication and integrated circuit design. The country is already Infineon’s biggest manufacturing hub in Asia. US-based Intel, on the other hand, is building its first overseas facility for advanced 3D chip packaging in Penang. The company’s total investment in Malaysia will reach USD 14bn in 2032, the Malaysian Investment Development Authority reported, making the country Intel’s largest offshore site.
Vietnam has become a key destination for global electronics manufacturers. According to figures of the country’s Ministry of Information and Communications, Vietnam has grown into the third largest chip exporter to the US, trailing only behind Malaysia and Taiwan, with revenues growing by 75% y/y to reach USD 562mn in February 2023. Major global players such as Intel, Samsung, Qualcomm, Texas Instruments, and many others have already set foot in the country. In January 2024, Reuters reported that fifteen US companies, including semiconductors firms, were interested in investing USD 8bn in Vietnam. The Vietnamese semiconductor market is expected to reach USD 7.01bn by 2028, growing at a CAGR of 6.69% in 2023-2028, a Technavio report claims.
Indonesia’s semiconductor sector has also been gaining attention. As the country is intent on positioning itself as an electric vehicle production hub, demand for semiconductors is set to grow. In a bid to catch up with its ASEAN peers Indonesia has been developing a road map for the silica industry as a cornerstone for building a microchip industry in the country. In November 2023, the US State Department announced that it would partner with the Indonesian government to explore opportunities to grow and diversify the global semiconductor ecosystem under the International Technology Security and Innovation (ITSI) Fund.
Thailand too has the potential to become a global player in the semiconductor industry. Its strategic location, well-developed infrastructure and large talent pool are the main competitive advantages of the country. Thailand’s Board of Investment (BoI) has approved 20 new investment projects worth THB 30bn from Taiwanese electronics companies, aiming to establish Thailand as a new export base for the industry. The BoI has identified semiconductors as a sector of critical importance and the Thai government has already introduced corporate tax breaks for chip producers. Thailand is keen on attracting companies that specialize in value-added front-end processes. The country is also trying to develop a local semiconductor industry.
The semiconductor and high-tech sectors are a top priority for the Philippines as well. The country will partner with the US under the ITSI fund to assess its semiconductor ecosystem and regulatory environment along with workforce and infrastructure requirements. In May 2023, US semiconductor company Analog Devices announced plans to invest USD 200mn in a new R&D facility as part of its expansion efforts in the Philippines.
The growth trajectory of the ASEAN semiconductor market is underpinned by the region’s healthy economic development, which has boosted demand for electronic devices. The growing use of Internet of Things and artificial intelligence are also fuelling demand for semiconductors. The sector is likely to continue to grow and the region is to gain a foothold in the global value chain because of its solid manufacturing foundation and booming domestic market.
In the future, ASEAN will play a crucial role in the global semiconductor industry and the exports of the region are seen experiencing substantial growth. ASEAN will have to focus on more value-added manufacturing, work out the existing regulatory challenges, and deepen relations with current and potential trade and investment partners.
The original news article and data contributions have been taken from the EMIS database.
Original source: EMIS Insights