The semiconductor industry in Southeast Asia has established is growing, with new chip startups emerging to make the region a possible hub for global tech manufacturing. According to PricewaterhouseCoopers (PwC), semiconductors have been the driving force behind transforming industries worldwide for more than 70 years. They have contributed to computing, smartphones, and data centres, among other innovative technologies, creating the chance that the sector will reach revenues of USD 1 trillion by 2030.

Professional services firm KPMG notes that the biggest threats facing the semiconductor industry include talent acquisition challenges, geopolitical tensions, and supply chain vulnerabilities. While new technologies like artificial intelligence (AI) bring advances to various sectors, they still create a lot of demand for chips, exacerbating a global shortage. 

We explore how AI agent technology is improving the way tech startups in Southeast Asia operate

Additionally, US tariffs and trade restrictions brought about by President Trump are causing realignments in the industry, pushing companies to move away from China to more accepted countries in Southeast Asia, such as Vietnam.

How Southeast Asia is joining the semiconductor race

The Association of Southeast Asian Nations (ASEAN) has established itself as a key part of the global tech supply chain over several years. Once the COVID-19 pandemic kicked in, nations realised how vulnerable the import-export system was and what they needed to do to fix it. Regarding semiconductors, large companies like Google and Samsung moved to start manufacturing in Southeast Asia.

Here are a few ways the region is going to compete in the semiconductor race:

Sector investments growing

ASEAN is seeing investments surging throughout the region in places like Malaysia, Vietnam, Singapore, and others. For example, Malaysia emerged as a hotspot for semiconductor firms as the US-China battles continued. Chip makers, such as Intel, GlobalFoundries, and Infineon, decided to set up or expand operations in the country. The investors were looking to benefit from the diverse local talent and already-built infrastructure.

Thailand chose to lobby for chip investments once the battle between Washington and Beijing intensified. Over in Singapore, Taiwan’s Vanguard International Semiconductor announced it would hasten construction of its 12-inch wafer fabrication in the city-state because geopolitical risks were pushing stakeholders to build chips outside of China. Wafer fab is about creating the foundational materials for chip making.

The Vietnamese National Assembly took steps to attract more foreign companies to the chip-making sector by simplifying procedures for investing in chip manufacturing. The goal was to get high-tech providers interested.

Local startup ecosystem emerging

Additionally, the government in Vietnam unveiled a national semiconductor strategy to join research collaborations with private companies. Its locally based incentives program seeks to attract investment in green initiatives since chip-making contributes to carbon emissions and other negative environmental impacts when mining for rare earth minerals. Moreover, investment companies are getting the opportunity to either develop their local startups in the value chain or acquire shares in existing businesses. 

Elsewhere, Fujifilm is investing in key semiconductor markets. It is collaborating with Singapore’s Institute of Microelectronics–part of A*STAR (Agency for Science, Technology and Research)—to establish and enhance its research and development (R&D) functions in the country. It will develop materials for next-generation semiconductor back-end processes. 

Increasing regional talent development

There is a strong demand for regional talent versed in semiconductors and chip manufacturing. Unfortunately, ASEAN faces skilled worker shortages, competition, and challenges in retaining the best employees. 

According to the International Data Corporation (IDC), the availability of well-trained labour is vital to the industry’s success. Thus, countries like Malaysia and Vietnam are committing funding to enable workers to receive training and expertise upgrades.

Singapore’s semiconductor ecosystem spans the entire value chain, and it uses education partnerships, career conversion and student outreach, microelectronics training, AMD’s IC design camp for undergraduates, and teaching next-gen AI engineers.

In other instances, fabless chip startups leverage local universities and R&D hubs to train trainers, upskill graduates, design training programs, and more.

Becoming a global semiconductor manufacturing hub

Venture capitalists like to invest in areas showing incredible potential for developing startup ecosystems geared toward success. The outlook for Southeast Asia’s ambitions to be a global semiconductor innovation hub is promising. The region’s strategic location has tech-savvy, hardworking, and innovative citizens, and the various governments are supporting the sector through regulations, incentives, tariff mitigation, funding, and training programs.

The International Trade Council (ITC) says the semiconductor industry Southeast Asia has established will have to overcome persistent geopolitical tensions. This means they will have to search for alternative sourcing and production facilities. Regional conflicts will also continue to disrupt supply chain routes. 

On the positive side, technological advancements and increased adoption of blockchain, the Internet of Things (IoT), and AI will boost supply chain transparency and mitigate labour shortages through robotics and automation. Moving forward, chip startups should consider sustainability initiatives in their tech manufacturing efforts to safeguard the environment and reduce their carbon footprints.