ASEAN’s Regional Ambitions for the Semiconductor Industry

ASEAN recently launched the ASEAN Framework for Integrated Semiconductor Supply Chain (AFISS), a key initiative during (and a deliverable of) Malaysia’s ASEAN Chairmanship in 2025. This non-binding Framework hinges on each member state (AMS) playing a specialised, complementary role while setting aspirational targets to move up value chains. The US-China strategic competition, however, poses opportunities and challenges to this ambition.

ASEAN’s position in the global semiconductor industry is significant. ASEAN contributed around 25 per cent to global semiconductor (SC) exports in 2023, with Malaysia and Singapore playing indispensable roles in parts of the global SC supply chain. Malaysia accounts for around 13 per cent of the global Assembly, Packaging and Testing (APT) output while Singapore contributes around 20 per cent of global SC manufacturing equipment production.

ASEAN economies have benefited from their integration into the global SC supply chain. In 2023, ASEAN exports of SC and SC parts and components to China and the US reached USD42.2 billion and USD15.1 billion respectively, largely driven by Singapore and Malaysia, and also Vietnam and the Philippines (Table 1). In 2023, ASEAN exports of SC manufacturing equipment to China and the US reached USD6.4 billion and USD1.7 billion respectively, with Singapore accounting for most of the exports, followed by Malaysia (Table 2).

Table 1. ASEAN exports, semiconductors (SC) & parts/components to China and the US (USD) & AMS’ shares (%)

Table 2. ASEAN exports of SC manufacturing equipment to China & the US (USD) and AMS’ shares (%)

ASEAN’s semiconductor industry does not benefit only from exporting SC and related products to third markets but also from importing them from third markets such as Taiwan, which accounts for 60 per cent and 90 per cent of the global chip (12 nm and above) and advanced chip (less than 12 nm) production, respectively. In 2024, Taiwan exported close to USD40 billion of SC and SC parts/components to ASEAN countries, close to 80 per cent of which went to Singapore and Malaysia (Table 3). In the same year, Taiwan exported around USD748 million of SC manufacturing equipment to ASEAN, mostly to Singapore (Table 4).

Table 3. Taiwan exports of SC & parts/components to ASEAN (USD) & Singapore & Malaysia’s shares (%)

Table 4: Taiwan exports of SC manufacturing equipment to ASEAN (USD) and Singapore’s & Malaysia’s shares (%)

Despite the promising developments, geopolitical headwinds have put ASEAN’s SC industry in a dilemma that requires a complex balancing act. For example, the Chinese government’s recent ban (on Chinese tech companies from buying Nvidia’s AI chips) is a worrying sign of potential technological decoupling.

The US has also been keen to bring the SC industry back home, including by vowing to impose a 100 per cent tariff on their imports, except for those made by companies already manufacturing in the US or which have committed to do so. This October, the Trump administration pitched to Taiwan to relocate 50 per cent of its chip production to the US. Given the pressure to ‘Make America Semiconductors Great Again’, major SC multinational companies (MNCs), including Taiwan’s TSMC and UMC, whose largest clients are located in the US, have recently invested in chip facilities there.

All these factors can impact ASEAN’s SC industry and have pushed ASEAN to think harder about building a more resilient supply chain for and in the region. In Southeast Asia, ASEAN will not just be relying on the US and China as their consumers and/or suppliers, technology sources or investors of first and last resort. The key to achieving this ambition is three-fold. 

ASEAN still has time to act, before… the expected technological bifurcation intensifies.

First, given AFISS, ASEAN could harness the diversity of its member states to build a full-spectrum of value-creating SC supply chains from just some trusted parts, especially for mature or legacy chips. By recognising individual strengths and weaknesses, ASEAN economies can not only set their own aspirational targets to move up the value chains but also collaborate and complement one another in building an integrated SC supply chain in the region. 

For example, Singapore could lead in advanced research and development (R&D) on AI and quantum technologies. Malaysia could shift into advanced packaging and chip design from largely APT. The Philippines could focus on chip design for some discrete products such as logic chips. Thailand and Vietnam could specialise in large-scale, back-end assemblies for components and specialised niche and sectorial applications (such as electric vehicle chips or high-tech household appliances).

Second, ASEAN needs to accelerate the localisation of foreign direct investment (FDI) in its MNC-driven semiconductor industry. The relevant ASEAN states aspire to move away from just being outsourced manufacturing countries or “Made in ASEAN”, to being “Made by ASEAN”, including by uplifting large local companies to become ASEAN MNCs with extensive global presence such as Northeast Asian examples like Samsung, SK Hynix and Toshiba.

To achieve these goals, it is more realistic to use coordinated efforts rather than any individual ASEAN country attempting to build a standalone giant to rival global leaders. It is also more realistic to focus on mature or legacy chip-making, providing an alternative to China’s dominance in mature or legacy chips, instead of focusing on advanced chips whose production needs highly specialised environments and factors ranging from human talent and technological know-how, to resilient infrastructure like back-up power grids and dedicated water treatment plants and systems.  

Third, ASEAN needs a collective solution to solve its regional talent shortage, which is reflected in individual countries’ talent shortages, including in Singapore and Malaysia. In Singapore, for example, three occupations are listed in the Shortage Occupation List for the SC industry: SC engineer, instrumentation engineer, and process engineer. Severe talent shortages in R&D and design skills in the region can arrest ASEAN’s aspiration in moving to higher-value-creating SC supply chains. In this regard, the implementation of AFISS could promote regional skill-sharing platforms, standardised certification for relevant chip-making skills, and shared R&D centres, for a start. 

ASEAN still has time to act, before SC investment to the region dries up, the US reshores more global chip-making activities, and the expected technological bifurcation intensifies, all of which can push ASEAN members to choose sides. The next 15 to 20 years will be a precious window of opportunity for ASEAN to realise its ambitions for this industry. In this regard, the shared vision embedded in AFISS, to allow the relevant AMS’ national efforts and policies to align and harmonise, could be harnessed and realised, before the window closes.

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