In the pulsating world of technology, where tiny chips power everything from our phones to our cars, a group of Southeast Asian nations quietly but powerfully influences the global semiconductor race. Imagine a world where your gadgets, vehicles, and even smart appliances cease to evolve or, worse, stop working. That’s a world without semiconductors, the tiny electronic brains inside most of our devices.
The Association of Southeast Asian Nations (ASEAN), a coalition of 10 countries, plays a pivotal role in ensuring that doesn’t happen. Nestled amidst the bustling markets of Asia, ASEAN isn’t just a spectator; it’s a key player, weaving a complex web of partnerships, innovations, and supply chains that fuel the world’s insatiable appetite for technology. From the intricate lanes of Singapore’s electronics markets to the expansive manufacturing hubs of Malaysia and Vietnam, these nations collectively ensure that the wheels of the global tech industry keep turning. But it’s not just about keeping production lines humming.
ASEAN is a crucible where ideas morph into innovations, where local startups rub shoulders with global tech giants, creating a vibrant ecosystem that’s as diverse as the cultures it springs from. In a world racing towards the next technological frontier, ASEAN isn’t merely keeping pace; it’s helping set the tempo, ensuring that the rhythm of progress resonates across continents. As we stand on the brink of a new era where technology will dictate the trajectory of societies, understanding ASEAN’s role in the semiconductor saga becomes not just relevant, but vital.
ASEAN In Semiconductors: Restriction To China
Right now, there’s a big, growing problem between two powerful countries, China, and the US, and it’s all about something called the global semiconductor race. This issue is causing a lot of changes and splits in how things are made and sent around the world, like bringing manufacturing back to home countries. So, countries all over the planet are shifting things around and trying to get a bigger piece of the action in this important tech area.
This race is just starting, and it’s going to affect several countries in ASEAN, like Malaysia, the Philippines, Singapore, Thailand, and Vietnam, which are all trying to figure out how to handle this tricky semiconductor competition.
Semiconductors are super important pieces for lots of industries, including things like artificial intelligence (AI) and electric cars. When we look at who’s leading the market, the US was the big boss in 2020, followed by countries like South Korea, Japan, the EU, and Taiwan. In 2022, the big names making money in this market include Samsung, Intel, and a few others.
Things got even more tense in October 2022 when the US said, “No more!” to exporting certain AI and semiconductor technologies to China. The US wants to slow down China’s progress and production of some advanced chips by not only blocking access to top-notch AI chips but also to crucial technologies used to design and make them.
These new rules don’t just slow down China in the semiconductor world but also make it depend more on its own suppliers to keep growing. Reacting to the US’s rules, Japan and the Netherlands also put new rules in place to control sending semiconductor technology to China, saying it’s for national security reasons.
China didn’t just sit back; it responded by limiting exports of important semiconductor materials, gallium and germanium, in July of this year. These materials are used to make a bunch of high-tech products like chips, solar panels, and electric car batteries. Even though China’s export ban is smaller in scope than the US’s restrictions, it’s going to have a big effect on the market and supply chains.
ASEAN trade with the US and China
In the big worldwide race to be the best in semiconductors (the tiny things that power our electronics), ASEAN, a team of countries that together have a super strong economy, is in a great spot to play a big part. Why? Because ASEAN has a bunch of good things going for it, like getting better at manufacturing, having skilled workers, and governments that are making policies to support growth. All these things make it an attractive place for investments and a potential powerhouse for making semiconductors.
When the global supply chain for semiconductors got all mixed up, ASEAN, especially countries like Malaysia, the Philippines, Singapore, Thailand, and Vietnam, expanded their electronics and semiconductor work. For a bit of number talk: while the US and China exported semiconductors worth US$28.4 billion and US$220 billion in 2022, ASEAN’s exports were not far behind at more than US$165.3 billion in the same year, a big jump from US$52.3 billion in 2017. Plus, the money ASEAN is making from the semiconductor market is expected to hit US$101.8 billion this year, showing it has a lot of potential in this specific area.
Countries like Singapore and Malaysia are already big players in the global supply chain, holding 11% and 7% of the global semiconductor market. Singapore is doing really well in wafer fabrication (making a key component of semiconductors), and Malaysia is a big deal in putting semiconductors together, testing them, and packaging them.
In 2021, ASEAN saw a 42% increase in foreign direct investment (money invested from other countries) to US$174 billion after a big drop in 2020. The investment in electronics, including semiconductors, also saw a big growth in that year. Trade between ASEAN countries and the US jumped from US$135.1 billion to US$452.2 billion, and ASEAN’s exports to the US went from US$87.9 billion to US$356.7 billion, with semiconductor exports going up by about 80% to US$9 billion. Meanwhile, trade between ASEAN and China hit US$975.3 billion in 2022, which is a massive increase from 2000. ASEAN’s exports to China also went up a lot, from US$22.2 billion to US$408.1 billion, with semiconductor exports reaching US$26.6 billion in 2022, which is a 176% increase from 2017.
So, with stronger trade and investment relationships with both the US and China, and with the growing tension between these two big countries, ASEAN is in a pretty good spot.
Because ASEAN’s economies are so tied up with the US, Europe, China, and other East Asian markets, it’s important for the group to stay neutral, not pick sides, and focus on working together more.
China Set To Benefit Amid Taiwan’s Shrinking Supply Chain
For many years, Taiwan has been the big boss in making semiconductors (the tiny chips that power loads of our electronic stuff), making more than 60% of them for the whole world. But lately, China has been stepping up and wants a piece of the action.
A fresh-off-the-press report from IDC says that some big changes are coming in the world of semiconductor making. Taiwan, which has been a giant in this field, might start making fewer chips in the future, including in foundry operations (where the chips are made) and in putting them together and testing them.
On the flip side, China is expected to start making more, thanks to changes in policies about semiconductors and some tense situations between different countries. The report, which is called The Impact of Geopolitics on Asia’s Semiconductor Supply Chain: Trends and Strategies, points out that the introduction of the CHIP acts and semiconductor policies in various countries will be the main drivers changing how the market works.
In this report that came out last week, Helen Chiang, who leads semiconductor research for IDC in the Asia-Pacific region and also manages their Taiwan operations, said, “Geopolitical shifts are fundamentally changing the semiconductor game.” What she’s saying is that the CHIP acts and semiconductor policies are making manufacturers come up with backup plans, which are being referred to as “China + 1” or “Taiwan + 1” production plans.
This big change has created a new worldwide setup for making and testing semiconductors, leading to growth in different regions of the semiconductor industry. “Even though we might not see big changes right away, long-term plans are paying more attention to being self-sufficient, secure, and in control of supply chains,” she said, pointing out that the way the industry works will shift from global teamwork to competition between different regions.
Chiang has a point, especially since big companies in the industry have been making strategic moves. “When it comes to foundries (places that make the chips), TSMC, Samsung, and Intel are leading the way with advanced processes in the US, which will slowly start to have an impact in the foundry field. At the same time, even though China is still figuring out advanced processes, its established processes have quickly evolved thanks to its own demand and national policies,” she highlighted.
How will the market share between China and Taiwan change?
According to IDC, which categorizes by where production is happening, they believe that the chunk of overall industry areas in China will keep growing, hitting 29% in 2027, which is a 2% rise from 2023. On the other hand, Taiwan’s piece of the market is predicted to drop from 46% in 2023 to 43% in 2027, while the US is set to see some growth in the advanced process area. “The US’s share for 7nm and below is expected to hit 11% in 2027,” Chiang added.
The newest predictions from IDC about the chip industry show that Beijing’s goal of being self-sufficient in high-tech industries has moved forward, even with the US leading efforts to shrink mainland China’s part in global technology supply chains. “Even while China is working through developing advanced chip-making processes, its established processes have quickly grown,” said the IDC report, supported by domestic demand and national policies.
Biden To Revise Export Control Regulations
The Biden administration is reportedly getting ready to update its rules about exporting certain things this month, with the goal of limiting China’s ability to get more equipment for making semiconductors and closing gaps in trade restrictions related to AI chips. At the same time, the European Union is looking at controlling exports for important technologies, including semiconductors and AI.
The actions by the US and Europe were sparked by China’s efforts to be technologically self-sufficient, which recently got a boost from Huawei Technologies’ new 5G-enabled Mate 60 Pro series smartphones. Since these devices are powered by a top-notch processor, it was seen as a win against tech sanctions led by the US, which included restricting access to advanced chip-making equipment.
Even though the exact origin of the high-tech processor, the Kirin 9000s, hasn’t been revealed, many people guess that it came from Semiconductor Manufacturing International Corp, which is China’s biggest chip-making place, based on third-party analyses of the Huawei phone.
Moreover, even with export controls put in place by the US, Japan, and the Netherlands, chip-making places in mainland China are predicted to grow their part of the mature 12-inch wafer production capacity to 26% by 2026, which is up from 24% in 2022, according to a report from research firm TrendForce in July.
Assembly and test to flourish in Southeast Asia
Considering the impact of global politics, tech advancements, and skilled folks in putting together and testing semiconductors, IDC pointed out that top integrated device manufacturers (IDM) in the US and Europe have started investing more in Southeast Asia.
“Companies that handle outsourced semiconductor assembly and testing (OSAT) are starting to shift their focus from China to Southeast Asia,” the report said. So, IDC is predicting that Southeast Asia, especially Malaysia and Vietnam, will make more progress in OSAT, grabbing a 10% global share by 2027. At the same time, Taiwan’s share is expected to drop to 47% in that year, down from 51% in 2022.
Conclusion
The world of making tiny tech parts, called semiconductors, is going through some changes. For a long time, Taiwan has been the big boss in making these parts, but things are shaking up. China is trying to make more and more, and now, places like Malaysia and Vietnam in Southeast Asia are becoming new hotspots for making these tiny tech bits because big tech companies from the US and Europe are investing there.
This shift is happening for a bunch of reasons, like political decisions and new investments, and it’s changing the map of where and how these important tech parts are made. So, the race to be the best in making semiconductors is not just about who has the best technology but also involves a mix of politics, trade rules, and changes in different regions. It’s like a big, complex game where the rules and players are constantly changing.
