Can ASEAN seize the opportunity in the global semiconductor industry?
The onset of a new gold rush looms large, spurred by the technological revolution sweeping economies in transformative waves.
From smartphones and electric vehicles to cutting-edge artificial intelligence (AI) applications, the semiconductor industry is a pivotal force driving innovation across various sectors and as such, it has ignited a global race between nations for semiconductor dominance.
Researchers from the Economic Research Institute for ASEAN and East Asia (ERIA) however believe that the implications of this global race for regions like ASEAN may be profound, as member states like Malaysia, the Philippines, Singapore, Thailand and Vietnam try to navigate what has become a complex and politically charged race for tech supremacy.
In an Op-Ed penned by Secretary General of International Economic Association (IEA) and Lead Advisor, Southeast Asia Region at ERIA, Lili Yan Ing and research associate Ivana Markus, there is untapped economic potential that the region can explore.
Entitled ASEAN in the Global Semiconductor Race, the authors shared how the global semiconductor market has been fuelled by the intensifying rivalry between China and the United States (US), prompting restructuring of global supply chains.
“ASEAN, a grouping of nations that together constitute the world’s fifth largest economy, has the potential to play a significant role as ASEAN offers strengths that can enhance its position in the semiconductor industry,” the report said.
“ASEAN represents a region with several advantages such as growing manufacturing capabilities, skilled workers, and supportive government policies, which can further attract investments to become a vital production hub for semiconductors.”
While American and Chinese exports for semiconductors globally accounted for USD28.4 billion and USD220 billion in 2022, respectively, the ASEAN region’s semiconductor exports accounted for more than USD165.3 billion in 2022, compared to USD52.3 billion in 2017.
Furthermore, the revenue for the region’s semiconductor market is projected to reach USD101.8 billion this year, reflecting the bloc’s vast potential in this specialised supply chain.
“Countries such as Singapore and Malaysia are already playing a significant role in the global supply chain, accounting for 11 per cent and seven per cent of the global semiconductor market share respectively.”
Singapore has built up notable capabilities in wafer fabrication constituting five per cent of global wafer capacity, while Malaysia is a key global player in assembly, testing, and packaging activities.
In 2021, ASEAN saw a remarkable surge in foreign direct investment (FDI) with a 42-per-cent increase, reaching a substantial USD174 billion, after a significant decline in 2020.
The electronics sector, including semiconductors, according to the authors, played a pivotal role in driving this surge, contributing significantly to the region’s economic growth.
“The global disruption in the semiconductors supply chain led to a further expansion of ASEAN’s electronic and semiconductor operations, particularly in Malaysia, the Philippines, Singapore, Thailand, and Vietnam.”
Touching on the growing geopolitical tensions that drive this global semiconductor race, the authors noted how “the bloc must maintain a neutral stance, avoid taking sides, and instead, enhance collaboration”.
“Diverse trade and economic partnerships could enhance ASEAN’s opportunities as well as improve ASEAN’s trade and investment”.
The authors also stressed how ASEAN needs to prioritise furthering its investment in research and development, manufacturing capabilities, production capacities and skills to enhance its potential for semiconductor innovation and manufacturing.
However, for the regional bloc to capture the high-tech equipment and supply chain, strategic moves focused on its foundation are also important.
“First, investment in research and development, particularly AI research, could support ASEAN’s semiconductor production capability and capacity.
“Second, ASEAN needs to improve and streamline its regulations and standards as a region to establish clear regulatory frameworks and facilitate trade.”
Lastly, with ASEAN’s population dividend, investment in education and training programmes emerges as the cornerstone strategy. This approach is crucial for nurturing a highly skilled workforce, essential for unlocking ASEAN’s long-term potential in the semiconductor industry’s regional development. – Wardi Wasli
