Southeast Asia has emerged as one of the beneficiaries of the restructuring of global supply chains. Amid geopolitical tensions and rising production costs, many multinational companies are diversifying manufacturing and supply chains beyond their traditional production bases. According to the ASEAN Investment Report 2025, Southeast Asia attracted a record US$ 226 billion in FDI in 2024. The region also saw an 8% increase as compared to the preceding year despite a decline in foreign investments globally.
However, in many key industries across Southeast Asia, significant portions of intellectual property rights, technologies, financing, production capacity and critical business decisions remain in the hands of the multinational corporations with headquarters outside Southeast Asia. Southeast Asia has to find ways of converting its current investments into strategic leverage for building up its industries and ASEAN’s influence in the global supply chain.
We explore what Temasek’s record US$400b portfolio in FY26 means for Southeast Asia
Semiconductors offer ASEAN an opportunity
Malaysia specialises in assembly, testing and packaging operations. Singapore has manufacturing and research expertise in the semiconductor manufacturing process, while Vietnam and the Philippines continuously work towards enhancing their electronic manufacturing and assembling capabilities, respectively. The combination of all these capabilities provides the basis for a regional semiconductor ecosystem.
Rather than compete with each other for similar investments, closer regional coordination can facilitate complementarity between ASEAN economies. Greater cooperation in research, engineering, supplier development and technology could allow ASEAN economies to capture more value beyond manufacturing. As global semiconductor value chains continue to diversify, ASEAN could expand its role beyond manufacturing into areas such as chip design, research and innovation.
Critical minerals highlight the importance of value creation
Critical minerals provide yet another strategic avenue, while demonstrating the pitfalls of being merely a raw materials provider. Both the Philippines and Indonesia have abundant reserves of minerals such as nickel and cobalt that are needed in EV battery technology as well as renewable energy production and advanced manufacturing. While the demand for these materials continues growing around the world as nations fast-track their energy transitions, exporting raw materials yields relatively limited economic value compared with downstream processing and manufacturing.
Better opportunities await the region in the areas of local refinery, mineral processing, battery material production, recycling and components manufacturing. By tapping into such industries, nations would be able to preserve more economic value domestically while simultaneously creating higher-skilled employment and a stronger industrial ecosystem. However, expansion should not be achieved at the cost of environmental protection or people’s well-being. According to OECD and regional policy studies, good governance, responsible mining practices and transparent regulatory policies will be essential for the development of competitive critical mineral industries in Southeast Asia in the years to come.
Electric vehicles and batteries require regional coordination
The manufacturing of electric vehicles is yet another sector in which ASEAN’s strengths are becoming increasingly interconnected. Indonesia has positioned itself as a hub for battery materials and electric vehicle manufacturing, which is supported by the region’s abundant nickel reserves. Meanwhile, Thailand remains an attractive destination for automotive investments, while Malaysia and Vietnam continue developing their own electric mobility sectors.
However, no single Southeast Asian country has all the necessary capabilities required across the full electric vehicle value chain. In this regard, a higher level of integration between countries within the region can help ASEAN to compete more effectively with larger manufacturing ecosystems elsewhere by encouraging cross-border specialisation instead of duplication. At the same time, a coordinated regional strategy would create more diversified production networks for multinationals across several ASEAN countries.
Solar manufacturing extends beyond production
Another example of where Southeast Asia has successfully attracted substantial investment yet still faces questions about long-term value capture is solar manufacturing. Several ASEAN countries now play important roles in manufacturing solar panels and renewable energy components for global markets. Manufacturing scale alone, however, may not guarantee a lasting competitive advantage.
Higher-value opportunities increasingly exist in advanced materials, energy storage technologies, power electronics, grid management software and clean energy innovation. Combining manufacturing capacity with stronger research and innovation capabilities could help ASEAN economies capture more value from the global energy transition. With increasing global demand for renewable energy, there is an opportunity for the region to create complete clean energy ecosystems instead of specialising in manufacturing alone.
Integration may determine ASEAN’s competitive advantage
The next phase of Southeast Asia’s industrial development might have less to do with individual national investment policies and more to do with regional cooperation. The latest economic priorities of ASEAN seem to be centred around developing better regional supply chains, connectivity and economic cooperation. Enhancement of transport networks, energy connectivity, digital networks, cross-border movement of goods, services, talent and capital could significantly strengthen the region’s collective competitiveness.
Rather than competing against one another for identical foreign investments, ASEAN countries could increasingly specialise in complementary industries that collectively strengthen regional supply chains. This approach would help multinational companies build more resilient manufacturing networks while also enabling local suppliers to access broader regional markets and participate in increasingly sophisticated production ecosystems. The IMF has noted that stronger regional integration can help economies become more resilient amid growing geopolitical fragmentation as well as shifting global trade patterns.
Looking beyond investment announcements
Foreign investment is crucial for the future economic development of Southeast Asia. New factories provide employment and enhance export and production capacity. Nevertheless, the measure of long-term success in Southeast Asia must be something other than headline investment figures. Transfer of technology, workforce training, participation of domestic suppliers, research and development capabilities, local ownership, innovation and strong industrial ecosystems may prove to be much more valuable than the total amount of capital committed.
With further developments in the global supply chain, there is the potential for Southeast Asia to shift from being a manufacturing hub to becoming a more influential participant in strategic industries. Doing so will require coordinated policies, sustained investment in human capital and greater regional collaboration.
Ultimately, the key focus should not only be on how many factories were established or the employment opportunities created. It is far more important to know whether investments today will help Southeast Asia shape the future of strategic industries. If ASEAN can turn foreign investment into technology, skills, domestic capabilities and globally competitive companies, it will have a far greater ability not just to participate in global supply chains, but to shape them.