COVID-19’s arrival in the Association of Southeast Asian Nations (ASEAN) not only affected the region but also the entire global tech supply chain. There were restrictions on movement, bans on people gathering at a location, a decrease in manufacturing, and fewer workers loading goods at the ports and other transit points. Furthermore, cross-border activities and trade were reduced out of fear of spreading the disease.
With the region’s digital transformation in full swing due to the pandemic—changing many sectors and people’s mindsets—it was essential for tech startups in Southeast Asia to develop sustainable methods for producing and distributing their products locally and overseas. In a report from Al Jazeera, Arsjad Rasjid, chairperson of the ASEAN Business Advisory Council (ASEAN-BAC), declared that the region should be the world’s supply chain.
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He added that Southeast Asia was the “New China” in terms of being a global transit hub for many goods. The area is doing better economically than other regions despite dealing with high inflation, recessionary pressures, and high energy and production costs. The region’s over-reliance on China as a trade partner has not worked as well as expected because the country remained on lockdown for longer than most regions. Its reopening has not gone well, as the nation is still experiencing various internal economic challenges.
Other problems prevalent in ASEAN’s supply options are that each local manufacturing place operates under different laws and policies, and the populations have their own distinct desires. Additionally, geopolitical tensions between the US and China and the Collective West and Russia mean there have been many disruptions to the distribution of goods. Global markets are enduring various effects of sanctions and threats from more prominent, powerful countries.
Factors contributing to Southeast Asia’s growth as a tech supply chain hub
In the last few years, Southeast Asia has unearthed top-notch tech startups, such as Grab, which disrupted traditional industries. It provides delivery services, transportation, food, seamless cash payments, and more. With a large, young, and tech-savvy population with access to smartphones and the internet, the region has thrived. Plus, the citizens are willing to try unique technologies and adopt them into their daily lives.
Other factors enabling the growth of supply chains worldwide include the desire for investors to diversify their investments during unstable economic periods and to access new markets. Southeast Asia Has been positioning itself as a tech hub, attracting more foreign investments in several industries.
China’s battle with the US has meant that companies have had to move their businesses away from the Asian giant to avoid getting caught up in international sanctions. Relocation benefits Southeast Asia by allowing it to obtain new startups, job opportunities, investments, and foreign attention, which can bring more financiers. Moreover, the presence of big companies creates the perception that the region is worth considering for business.
A well-developed tech startup ecosystem makes the region competitive internationally and accelerates infrastructure development. It enables policymakers and stakeholders to understand companies’ demands and help them build sustainable global pathways. That means addressing waste management concerns, using eco-friendly transportation, and focusing on travelling using clean energy.
How Southeast Asia fits into the global tech distribution channels
Here are a few examples of Southeast Asia’s role in specific distribution channels:
Electronics
According to data from the US Geological Survey, Indonesia and the Philippines have the largest nickel deposits, accounting for about 50%+ of the global demand. Nickel is essential in manufacturing electronic devices. Apple Inc. supplier BOE is moving some of its operations to Vietnam from China.
Semiconductors
As per the Al Jazeera report, Apple, Google, and Samsung moved to find alternative locations—such as Vietnam—once the US-China trade war intensified. Malaysia has semiconductor giants like AMD and Intel and is a significant chip exporter.
Automotive
Southeast Asia has a bustling electric vehicle (EV) market, with companies like Nissan and Tesla committed to setting up local production plants. Regional countries seek to adopt EVs to meet the pollution reduction and sustainability targets listed by the countries.
Software and IT services
Novel technologies, such as artificial intelligence (AI) and cloud computing, are helping to lower emissions in the tech supply chain. Data centres contribute to collecting, storing, and analysing data to develop solutions for the public good.
Strategies moving forward
Tech startups in Southeast Asia can make a difference through innovative technologies that improve global distribution channels. Governments can play their part by increasing Investment in infrastructure projects, improving the regulatory climate, and using tax benefits to attract foreign investments and take advantage of lower labour costs and a tech-savvy market.
Cooperation is needed to resolve geopolitical challenges in Ukraine and the South China Sea to ensure the smooth flow of products and people. If the region successfully addresses these challenges, transferring goods and raw materials from one location to another will be much easier.