Southeast Asia is experiencing a surge in semiconductor exports, significantly impacting the economies of countries like Vietnam and the Philippines. The World Bank’s recent analysis indicates that this boom is pushing these nations up its income rankings. The growth is fueled by two main factors: increased demand for artificial intelligence and a shifting geopolitical landscape between the U.S. and China, prompting companies to diversify their production locations. As a result, the regional chip export industry is now valued at approximately $258 billion.
Rather than simply serving as individual manufacturing sites, Southeast Asian governments are aiming to establish a cohesive supply chain in response to the fragmentation caused by U.S.-China tensions. To this end, the Association of Southeast Asian Nations (ASEAN) introduced the ASEAN Framework for an Integrated Semiconductor Supply Chain (AFISS) in 2025. This initiative—part of Malaysia’s chairmanship agenda—encourages member countries to specialize in complementary roles within the semiconductor value chain.
Countries such as Malaysia, Singapore, Vietnam, Thailand, and the Philippines have all seen gains from the semiconductor surge, with exports of semiconductor products to China estimated at $42.2 billion and $15.1 billion to the U.S. in 2023. Piriya Piriyakrit, a senior analyst at BowerGroupAsia, noted that the region has established itself as a crucial center for semiconductor manufacturing, particularly in assembly, testing, and packaging, thanks to a wave of investments spurred by the COVID-19 pandemic.
Robert Walker, a research fellow at the Lowy Institute, stated that rising demand, especially in AI, positions Southeast Asia advantageously for future semiconductor supply chains. He emphasized that although the AFISS framework won’t seamlessly create a unified production base within the region, it could enhance regional cooperation and competitiveness in the semiconductor sector.
Enhancing Regional Cooperation
While Southeast Asia offers a viable alternative for companies looking to diversify away from China, meaningful integration under AFISS still depends on member states’ willingness to cooperate, according to Walker. He urged that for the framework to be effective, it must promote collaboration without infringing on the individual sovereignty emphasized by ASEAN member nations.
Chandra Putra, an economist based in Jakarta, praised the idea of AFISS but cautioned that its success depends on overcoming national interests. Meanwhile, Hans Vriens, co-founder of Vriens & Partners, noted that various parts of the semiconductor supply chain are already distributed among Southeast Asian countries, creating a unique opportunity for complementary investments.
Moving forward, experts agree that addressing logistical challenges such as customs procedures and the mobility of skilled workers will be crucial for enhancing competitiveness across the region. Arata Kuno from Asia University highlighted the importance of building a network that leverages member strengths while remaining connected to global supply chains, rather than aspiring to complete self-sufficiency.
As regional players like Malaysia and the Philippines aim to transition beyond assembly and into higher-value manufacturing processes, the path forward includes overcoming existing barriers, such as skills shortages and ongoing investigations like Malaysia’s $250 million deal with British chip designer Arm.
In conclusion, while the development of cutting-edge fabrication facilities represents one pathway, opportunities in advanced packaging may offer a more immediate route for strengthening the semiconductor sector in Southeast Asia. The region must focus on nurturing local technology firms and establishing a robust environment for innovation in order to truly capitalize on its strategic advantages in the global chip market.
