Semiconductor competition continues after Malaysia announced her mission to be Southeast Asia’s largest integrated circuit design park last April. Now, Vietnam joins the competition for the same crown, with the support from an American semiconductor titan – Marvell Technology Inc.

Marvell Technology, Inc., a titan in data infrastructure semiconductor solutions, accelerated the growth of its workforce and presence in Vietnam in the past year since the company announced plans to expand R&D, engineering and design activities in the country. Marvell committed to 50% growth of its workforce in Vietnam in three years, a target shared by the company during last year’s U.S.-Vietnam Innovation and Investment Summit attended by Marvell Chairman and CEO Matt Murphy. Today, Marvell is ahead of its plans, achieving more than 30% growth in just eight months.

Marvell has also expanded its physical footprint in Vietnam with a new location in Da Nang, adding to its offices in Ho Chi Minh City. The growth of its footprint demonstrates the company’s commitment to creating a world-class semiconductor design hub in the country.

“We are excited with the momentum we’ve gained since we announced our design center plans last year, including our progress in adding top engineering talent to our team and expanding our number of sites,” said Murphy. “Vietnam is rapidly becoming a center of semiconductor innovation and we are committed to being part of that.”

A new Marvell design center facility in Ho Chi Minh City, which is expected to open within the next year, and other Marvell engineering facilities in Vietnam are focused on high-speed data center optical connectivity, storage, and analogue and mixed-signal semiconductor technologies. These are critical to the build-out of accelerated infrastructure to meet the rising performance and power requirements of artificial intelligence (AI) and cloud data centers.

“Marvell has been part of the technology ecosystem in Vietnam for over ten years. The company is committed to attracting the best and brightest engineering talent to its semiconductor design center in Vietnam, and to contributing to the growth of the country’s semiconductor community,” said Dr. Loi Nguyen, Executive Vice President of Cloud Optics at Marvell and a native of Ho Chi Minh City.

Malaysia’s Economy Minister Rafizi Ramli said the government will offer incentives including subsidised office spaces, exemptions on employment passes, relocation services and lower corporate tax rates for foreign venture capital firms, tech entrepreneurs and unicorns – startups reaching a $1 billion valuation – looking to invest in Malaysia.

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TTM Technologies, Inc. a leading global manufacturer of technology solutions including mission systems, radio frequency (“RF”) components and RF microwave/microelectronic assemblies, and quick-turn and technologically advanced printed circuit boards (“PCB”s), opened its first manufacturing plant in Penang, Malaysia with an investment of US$200 million (approximately RM958 million). 

Malaysia is aiming to be Southeast Asia’s Largest Integrated Circuit Design Park, with the goal of being among the top 20 countries in the global startup ecosystem index by 2030. Prime Minister Anwar Ibrahim said the proposed integrated circuit design park was part of Malaysia’s efforts to move beyond backend chip assembly and testing and into high-value front-end design work.

Built on 27 acres in Penang Science Park, TTM’s state-of-the-art facility has highly innovative and automated PCB manufacturing capabilities. This project is the result of the close collaboration between TTM and its customers to address the increasing demand for geographical manufacturing diversity and PCB supply chain resilience.

The plant is customised to support mass production requirements in various commercial end markets, including networking, data centre computing, medical, industrial, and instrumentation.

YAB Tuan Chow Kon Yeow, Chief Minister of Penang said,

“Penang is indeed proud to be the chosen location for TTM to establish its first large-scale, highly automated, and innovative PCB manufacturing plant in Southeast Asia, which also signifies the confidence that foreign investors have placed in Penang. Often lauded for its well-developed industrial ecosystem, Penang has the capacities and capabilities to support the needs of industrial players in next-generation technologies and growth strategies. I am optimistic that TTM will reap a myriad of benefits from its operation in Penang, the Silicon Valley of the East.”

The inauguration of TTM’s Penang plant was marked by the official opening ceremony, presided over by YAB Tuan Chow Kon Yeow, Chief Minister of Penang; Pn. Najihah Abas, Executive Director, Investment Promotion of Malaysian Investment Development Authority (“MIDA”); YBhg. Dato’ Loo Lee Lian, Chief Executive Officer, InvestPenang; Mr. Thomas Edman, President, and Chief Executive Officer, TTM Technologies, Inc.; Mr. Philip Titterton, Executive Vice President and Chief Operating Officer, TTM Technologies, Inc.; senior government officials; and TTM’s senior management.

The establishment of TTM’s Penang plant will facilitate the creation of approximately 1,000 employment opportunities across various categories for local talent by 2025. The expansion will generate substantial opportunities for TTM’s local suppliers and will help cultivate the skills of local technical talent in cutting-edge PCB technology solutions.

TTM anticipates the new plant will generate full run rate revenue of about US$180 million (approximately RM855 million) by 2025. Furthermore, the plant is built to support a Phase 2 expansion that could result in a 25% increase.

Mr. Sikh Shamsul Ibrahim Sikh Abdul Majid, Chief Executive Officer, MIDA emphasised:

“It brings me great pleasure to underscore the significant benefits TTM Technologies’ investment brings to Malaysia’s electrical and electronics (“E&E”) industry, especially within the semiconductor sector. With TTM’s expertise in high-tech solutions and advanced printed circuit boards, Malaysia is now a critical player in the global semiconductor supply chain.

The inauguration of TTM’s cutting-edge facility in Penang not only strengthens the growth and resilience of Malaysia’s E&E industry but also elevates our capabilities in the next generation of PCB manufacturing. This development aligns seamlessly with the strategic objectives outlined in the New Industrial Master Plan (“NIMP”) 2030, focusing on bolstering the semiconductor ecosystem. It opens avenues for skill development and knowledge sharing among local talents, reinforcing Malaysia’s stature on the global stage as a competitive, technologically advanced nation.”

Mr. Thomas Edman, President, and Chief Executive Officer of TTM Technologies, commented:

“The opening of our flagship plant in Penang marks a significant milestone for TTM. We are thrilled to embark on this expansion plan, with a state-of-the-art facility that underscores our commitment to providing our customers with differentiated advanced technology PCB solutions on a global scale. Today, we are proud to celebrate the grand opening of TTM’s first large-scale, highly advanced technology-equipped facility in Southeast Asia. As we step into this new era of innovation and expansion, we are committed to elevating industry standards, meeting customer needs, and propelling TTM’s growth as a new contributor to the Malaysian economy.”

“Penang’s robust industrial eco-system, position as the electrical and electronics hub, strong talent pool, and conducive business environment have made Penang a preferred location for TTM. Due to the outstanding support of the government and the efforts of our employees, TTM is now entering our production ramp only two years after our initial ground-breaking. As TTM builds our presence in Penang, we eagerly anticipate a longstanding relationship and mutually rewarding partnership with the Malaysian government, our customers, and our critical vendors,” concluded Mr. Edman.

Besides contributing to the industry’s needs, TTM is strongly committed to protecting its staff, community, customers, and the environment. To further TTM’s sustainability efforts, the new facility is configured to minimise energy and water consumption and will reduce the carbon footprint by 60% when compared to a traditional PCB plant while still meeting rigorous environmental operational standards.

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Source: Reuters

Malaysia is aiming to turn Kuala Lumpur into a regional digital hub, with the goal of being among the top 20 countries in the global startup ecosystem index by 2030. Prime Minister Anwar Ibrahim said the proposed integrated circuit design park was part of Malaysia’s efforts to move beyond backend chip assembly and testing and into high-value front-end design work.

The country is a major player in the semiconductor industry, accounting for about 13% of global testing and packaging. The park, to be backed by Malaysia’s central Selangor state, will house world-class anchor tenants and collaborate with global companies such as British chipmaker Arm Holdings, Anwar said, without providing further details.

Malaysia’s sovereign wealth Khazanah Nasional will also launch a fund to invest in innovative high-growth Malaysian companies, with an initial allocation of RM1 billion (US$209 million), Anwar told the KL20 Summit event, aimed at launching new policies to support Malaysian start-ups.

Economy Minister Rafizi Ramli said the government will offer incentives including subsidised office spaces, exemptions on employment passes, relocation services and lower corporate tax rates for foreign venture capital firms, tech entrepreneurs and unicorns – startups reaching a $1 billion valuation – looking to invest in Malaysia.

“We want to attract global unicorns to enter Malaysia, so that high-skilled and high-value jobs are created, besides developing a pipeline of future entrepreneurs and senior leaders in tech,” Rafizi said.

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As the country scrambles to execute search and rescue, automakers might need to brace themselves for more impact coming from disruptions of suspended port operations till further notice. According to Statista.com, Japan imported ¥269.94 billion (US$1.78 billion) of auto parts from ASEAN last year for its domestic assembly. These automakers often source various components such as engines, transmissions, electrical parts, and body parts from Southeast Asian countries. 

In 2022, the Observatory of Economic Complexity (OEC) noted Japan imported US$7.93 billion worth of motor vehicles parts and accessories from China (US$3.38 billion), Thailand (US$831 million), Germany (US$501 million), South Korea (US$447 million) and the United States (US$423 million).

Apart from auto parts, ASEAN enjoys a trade surplus of more than US$250 billion – the majority of which are due to exports of electrical machinery. The bloc exported some US$73 billion of electrical machinery and equipment in 2021, which makes up 28% of all ASEAN exports to the US. United States also imports other electrical machinery from Malaysia (US$1.73 billion), Indonesia (US$1.05 billion) and Thailand (US$1.04 billion).

What Does It Leave The Automakers?

Ford CFO John Lawler told Bloomberg TV the incident will have a negative impact on deliveries of parts. He said Ford is looking to reroute car parts to other east coast ports and it would draw on its experience with COVID-related supply chain disruptions, but that the supply chains will inevitably be lengthened. 

“It’s a large port with a lot of flow through it, so it’s going to have an impact. We’ll work on the workarounds,” he added.

GM spokesman Kevin Kelly said GM uses the port to ship some vehicles “to select export markets”. GM exports the Chevrolet Corvette, built in Bowling Green, Kentucky, to the United Kingdom through Baltimore as one example. Kelly said GM is working with its logistics providers to find shipping options at other ports, but GM expects only a minor impact on operations.

Stellantis spokeswoman Jodi Tinson said in an emailed statement, “The Port of Baltimore is an important waterway for the automotive industry. We are initiating discussions with our various transportation providers on contingency plans to ensure an uninterrupted flow of vehicles to our customers and will continue to carefully monitor this situation.”

Port of Baltimore issued a statement giving no definite date of vessel traffic resumption, which says a lot about verticals affected. If these equipment cannot make into the US, that might just mean another episode of supply chain issues and freight price gouging. Japan has officially entered a recession  with one export sector forcefully paused, the ripple will reach ASEAN suppliers.  

Although there are other ports on the East Coast, it does not translate directly to business as usual. Port capacities would be a question in terms of port throughput, and the stranded cargo contends with waiting time or even diverting further to the West.

Kevin Linderman, Professor and Supply Chain Expert at Pennsylvania State University, said: “They will likely have to reroute shipping to other ports on the East Coast. However, this will put additional demand on these ports, and shippers may not be able to access US markets.”

Apart from auto parts, construction machinery is also affected. Reuters noted at least 40 ships are now more or less trapped inside the port, and some 30 others planned to arrive there.

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Source: Chosun.com

Southeast Asia enjoyed increasing popularity of Chinese brands, and it caused Samsung’s shipment volume and market share to decrease compared to the same period last year. Canalys’ findings revealed a total of 7.26 million smartphones were shipped in January from five Southeast Asian countries, including Indonesia, the Philippines, Thailand, Vietnam, and Malaysia. It marks a 20% increase in shipment volume compared to the same period last year.

Among these, Samsung Electronics has shipped 1.5 million units, fueled by the popularity of the Galaxy S24 series. As a result, the company has achieved a market share of 20% , securing the first rank. Samsung had lost the top spot in Southeast Asia to the Chinese company Transsion in December last year but managed to regain it within a month.

According to market research firm, Canalys, the overall economic recovery in Southeast Asia has led to an increase in smartphone demand. Rising interest in Galaxy’s AI (Artificial Intelligence) technology has been a positive factor as well. Xiaomi secured the second spot in the market with a share of 18%, followed by Transsion and Oppo, both with a share of 15%. Vivo came in fifth with 12%.

However, Samsung Electronics is lagging behind Chinese companies in terms of growth. In January, Samsung’s smartphone shipments in Southeast Asia declined by 11% year-on-year, and its market share dropped by 7 percentage points to 20% from 27% in January of the last year. 

On the contrary, Xiaomi’s shipment volume surged by 128% during the same period, and Transsion’s shipments exploded by 190%, challenging Samsung Electronics.

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Dr. Sean Black, Spirit AeroSystems Senior Vice President, Chief Technology Officer and Chief Engineer, said the new centre will allow Spirit to expand engineering services to meet growing customer demand as air travel continues to recover to pre-pandemic levels and higher.

Located in the middle of the Subang factory, the centre has been expanded through two renovation projects to model and furnish space and incorporate soundproofing in the workspace to accommodate new engineering functions for the Malaysia engineering team, including 24-hour engineering service to Spirit factories around the globe. It is equipped with state-of-the-art engineering technology, high speed networks, and engineering software.

Black said that Spirit’s engineering team in Malaysia is already a significant player in the design of the A350XWB Section 15 Freighter, A350XWB Ultra Long Range and a key partner to A220 Wing program.  

“Expanding engineering services in Malaysia gives Spirit the ability for around-the-clock support for our global manufacturing locations and development programs, improving engineering turn-around time, so we can provide service to meet our growing customer demand,” Black said. “Additionally, an expanded engineering office in Malaysia will enhance supply chain communications in the Asia-Pacific region by providing operations within the same time zone, as well as culture and language advantages.”

Black added that upgrading engineering capabilities for the company’s Malaysia facility creates future opportunities for Spirit to offer design-and-build capabilities in that region.

“A stronger engineering workforce in Malaysia helps Spirit have better agility and capacity to serve our global customers,” Black said.

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Source: Reuters

The companies are asking Malaysian chip packaging firms to assemble a type of chip known as graphics processing units (GPUs), according to sources with knowledge of the discussions. The requests only encompass assembly – which does not contravene any U.S. restrictions – and not fabrication of the chip wafers, they said. Some contracts have been agreed.

Seeking to limit China’s access to high-end GPUs that could fuel artificial intelligence breakthroughs or power supercomputers and military applications, Washington increasingly placed restrictions on their sales as well as on sophisticated chip-making equipment.

As those sanctions bite and an AI boom fuels demand, smaller Chinese semiconductor design firms are struggling to secure sufficient advanced packaging services at home, analysts have said. However, China has established its track record for acquiring western technologies through trade.

Some Chinese companies are keen on advanced chip packaging services. Advanced packaging of chips can significantly improve chip performance and is emerging as a critical technology in the semiconductor industry. This sometimes involves the construction of chiplets where chips are packaged tightly to work together as one powerful brain.

Although not subject to U.S. export restrictions, it’s an area that can require sophisticated technology which the firms worry might one day be targeted for curbs on exports to China.

Why Malaysia?

Malaysia, a major hub in the semiconductor supply chain, is seen as well placed to grab further business as Chinese chip firms diversify outside of China for assembling needs. Unisem, whose largest shareholder is China’s Huatian Technology, and other Malaysian chip packaging companies have seen increased business and inquiries from Chinese clients.

Unisem Chairman John Chia said: “Due to trade sanctions and supply chain issues, many Chinese chip design houses have come to Malaysia to establish additional sources of supply outside of China to support their business in and out of China.”

Chinese chip design firms also see Malaysia as a good option because the country is perceived as being on good terms with China, is affordable, with an experienced workforce and sophisticated equipment. Asked whether accepting orders to assemble GPUs from Chinese firms could potentially provoke U.S. ire, Chia said Unisem’s business dealings were “fully legitimate and compliant” and the company did not have the time to worry over “too many possibilities”.

He noted that most of Unisem’s customers in Malaysia were from the United States. The U.S. Department of Commerce did not respond to requests for comment.

Other big chip packaging firms in the country include Malaysian Pacific Industries and Inari Amertron. They did not respond to Reuters requests for comment.

Chinese companies are also interested in having their chips assembled outside China as that could also make it easier to sell their products in non-Chinese markets, said one source, an investor in two Chinese chip startups.

Malaysia currently accounts for 13% of the global market for semiconductor packaging, assembly, and testing and is aiming to boost that to 15% by 2030. Chinese chip firms that have announced plans to expand in Malaysia include Xfusion, a former Huawei unit, which said in September it would partner with Malaysia’s NationGate to manufacture GPU servers – servers designed for data centres and which are used in AI and high-performance computing.

Shanghai-based StarFive is also building a design centre in Penang, and chip packaging and testing firm TongFu Microelectronics said last year it would expand its Malaysia facility – a venture with U.S. chipmaker AMD. Offering an array of incentives, Malaysia has attracted multi-billion dollar chip investments. Germany’s Infineon said in August it would invest €5 billion (US$5.4 billion) to expand its power chip plant there.

Intel announced in 2021 that it would build a $7 billion advanced chip packaging plant in Malaysia. 

Chinese companies are not just choosing Malaysia. In 2021, JCET Group, the world’s third-largest chip assembly and testing company, completed an acquisition of an advanced testing facility in Singapore. Other countries such as Vietnam and India are also seeking to expand further into chip manufacturing services, hoping to lure clients keen to minimise U.S.-Sino geopolitical risks.

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Source: Manufacturing Asia

The headline ASEAN manufacturing purchasing managers’ index (PMI) rose to 50 last month from 49.6 in October, indicating steady operating conditions across the region. Last month’s print also ended two straight months of contraction. 

Three of the seven nations surveyed recorded improvements last month, led by the Philippines whose manufacturing sector jumped to a nine-month high of 52.7. The health of the manufacturing sectors in Indonesia and Singapore also expanded last month at the same modest rate of 51.7. Factory activity in Myanmar (48.1), Malaysia (47.9), and Thailand (47.6) all worsened last month while Vietnam was the laggard at 47.3.

For the entire region, factories raised their output to its highest level in three months as companies worked through outstanding orders piled up in the first half of the year, despite muted demand. 

Total factory others continued to dip for the third month running, with new orders from overseas declining once again.

Lower new orders, meanwhile, helped companies to catch up with their backlogs without cutting their staff numbers. Factories continued to grapple with high input prices that rose at its fastest pace since April, resulting in a slight increase in output charges. For the next 12 months, ASEAN manufacturers remained optimistic overall although the sluggish demand has tempered their expectations.

“If customer demand continues to wane, it will be detrimental to ASEAN manufacturing sector performance in the months ahead, said Maryam Baluch, economist at S&P Global Market Intelligence.

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China has consistently held the position of ASEAN’s fifth largest FDI investor, following the US, ASEAN itself, Japan, and the European Union. However, western multinational corporations (MNCs) are crucial in driving investment in ASEAN, as they diversify supply chains and implement the China+1 strategy.

The China Plus One strategy does not necessarily mean companies are moving away from China altogether. Instead, they are diversifying their operations and establishing a presence in additional locations while still maintaining their manufacturing or sourcing activities in China. 

Popular destinations for companies implementing the China Plus One strategy include other countries in Southeast Asia, such as Vietnam, Thailand, Malaysia, and Indonesia, which offer lower labour costs and attractive investment incentives. These countries have seen increased FDI as a result of companies seeking to complement their operations in China.

China’s outward direct investment (ODI) into ASEAN recorded a compound annual growth rate (CAGR) of 13.5% between 2013 and 2018, followed by a continued rise of 8.0% between 2018 and 2022. ODI flows into ASEAN reached an impressive US$18.7 billion in 2022, contributing 11% of China’s total ODI.

The Breakdown

Going by geography and industry, Singapore and Indonesia were top destinations for Chinese ODI, with the manufacturing sector dominating. Singapore attracted the highest investment flow of a cumulative US$ 33.9 billion between 2018 and 2022, followed by Indonesia at US$ 15.2 billion during the same period. Strong growth rates were observed across Indonesia, Thailand, and Vietnam, with 10-25% CAGR.

By industry, manufacturing sector drew the largest investment amounting to US$ 33.3 billion over the past five years. Subsequently, wholesale and retail trade received US$ 14.7 billion. Strong growth rates of 10-20% CAGR were observed in manufacturing and electricity and gas sectors. In addition, the information and software sector witnessed a sizeable 50% growth.

Volume of outward FDI flows from China to ASEAN countries in 2022, by sector (in million U.S. dollars)
Source: Statista.com

Data from Statista.com revealed in 2022 alone, China’s outward FDI flows to the manufacturing industry in ASEAN countries reached around US$8.2 billion. DBS’ research added Indonesia remains the primary investment destination, while Malaysia is emerging as a new destination for strong growth. 

Notably, Indonesia saw nearly a 400% increase, reaching US$ 5.3 billion in H1 2023. Investment in Malaysia more than doubled, amounting to US$ 1.6 billion in H1 2023. Vietnam also maintained its steady upward trajectory, reaching US$ 530 million.

The manufacturing sector remains a hotspot for Chinese investment this year. For instance, Shandong Xinhai and BaoWu committed US$ 1.3 billion to establish a ferronickel processing facility on Sulawesi island in partnership with Vale Indonesia.

Zhejiang Huayou Cobalt invested US$ 2.4 billion in partnership with Ford and Vale Indonesia to supply high-quality nickel for electric vehicle batteries. Meanwhile, automotive giants like Zhejiang Geely and BYD strategically invested in Malaysia and Vietnam to expand their car production bases. In addition, the alternative energy and construction sectors also saw a notable rebound in Chinese investment.

According to the China Going Global Investment Index compiled by Economist Intelligence (EIU), ASEAN has made a significant leap in its ranking this year. Among the 80 major investment destinations, Singapore tops the chart as the most attractive destination for Chinese investors, with Indonesia following closely in the 2nd position, Malaysia in 3rd, Thailand in 5th, and Vietnam in 6th.

Key Sectors Chinese Investors Are Expected To Focus On In The Coming Decade

Electronics
China dominates global production of mobile phones, PCs, and various other consumer electronics products; contributing to 80-90% of the global iPhone assembly. Major manufacturers within the global electronics supply chain are expected to strategically diversify their production facilities after Covid.

This diversification will involve not only the western electronics manufacturers based in China but also the Chinese manufacturers. Among Apple’s top 200 suppliers in 2022, more than 40 were Chinese companies based in mainland China.

On the demand side, the acceleration of digitalisation process after Covid is expected to generate rising demand for various electronics devices and components within ASEAN. This encompasses a continued rise in smartphone penetration rates, establishment of smart factories, planning and construction of smart cities, among others.

Vietnam, with its well-established production network, particularly in the smartphone domain, is expected to remain a preferred investment destination in the electronics sector for Chinese firms. Other ASEAN countries like Malaysia and Thailand, which possess electronics manufacturing capabilities, also hold potential to attract Chinese investment within this sector in the coming years. It is also useful to note Vietnam is now actively doing what it can to qualify as a semiconductor manufacturing hub to support the electronics sector.

Electric Vehicles (EVs)
China currently dominates the downstream global EV supply chain, including a 50-70% share in certain material processing, 70% in EV battery production, and 50% in EV production. The upstream EV supply chain, particularly mining, is dominated by the resources-rich countries like Australia, Indonesia, and Congo.

Indonesia’s embargo on nickel ore exports in recent years has triggered realignments in the EV supply chain. Chinese firms have been compelled to localise their processing facilities for EV metals in Indonesia to secure the supply of nickel resources. It is possible that ASEAN countries may introduce similar protective measures on critical minerals in the future, to further encourage supply chain localisation.

Meanwhile, Chinese EV manufacturers are eyeing the ASEAN market, due to its promising demand prospects. EV adoption in ASEAN remains nascent compared to China, with EV sales constituting 1-10% of new vehicle sales.

ASEAN countries are introducing strategic policy measures to accelerate EV adoption, ranging from tax incentives, subsidies for EV purchases, to the facilitation of EV charging infrastructure. Singapore, Thailand, and the Philippines have set ambitious targets of achieving a 100% EV adoption rate by 2030-2040 — presenting significant opportunities for Chinese EV manufacturers looking to tap overseas markets for expansion.

Renewable Energy
Investment in renewable energy is expected to align closely with the global push for decarbonisation. In response to this imperative, the Chinese government is actively promoting the transition of State-Owned Enterprises (SOE) overseas investment within the BRI framework, moving from the traditional coal and mining activities towards renewables projects.

Meanwhile, the ASEAN region, endowed with abundant natural resources including wind, hydro, and solar power, holds substantial technical potential for renewable energy expansion. The majority of ASEAN countries are aiming to achieve a 30-40% share of renewables in their power generation mix by 2030-2035. This underscores substantial demand for renewables investment in the years ahead.

Technology, Media And Telecommunication (TMT) Services
Investment in TMT services will be influenced in part by policy and regulatory changes. Chinese internet, fintech and other private enterprises in the TMT services sector are facing challenges due to the complex regulatory environment in China’s domestic market, and stricter investment scrutiny in the US. As a result, they are exploring opportunities in the ASEAN market more extensively.

In the manufacturing sector where Internet Of Things (IoT) gets increasingly common, downtime and enhanced efficiency have become imperative staples to beat competition. That is also where the industry witnesses many players offering solutions such as easy accessibility and servicing 24/7 for machine shops, evangelising the importance of predictive maintenance. 

According to a collaborative report by Google, Temasek, and Bain & Company, Southeast Asia’s digital economy will surge from US$ 200 billion in 2022 to US$ 600 billion -1 trillion by 2030. Emerging markets like Indonesia and Vietnam are poised for substantial growth in this sector. Singapore, with its role as a regional investment and financing hub in the TMT startup domain, stands to benefit as well.

China’s ODI underscores ASEAN’s growing appeal, with the republic consistently ranking as ASEAN’s fifth largest FDI investor. While western multinational corporations play a pivotal role in driving investment, the China Plus One strategy has emerged as a nuanced approach.

Rather than a complete shift away from China, companies are strategically diversifying their operations. Southeast Asian countries like Vietnam, Thailand, Malaysia, and Indonesia have become favoured destinations with lower labour costs and attractive incentives. The sustained growth in China’s ODI into ASEAN, with a notable 11% contribution to China’s total ODI in 2022, signifies the enduring partnership and the evolving dynamics of economic collaboration between these two influential regions.

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Southeast Asia’s manufacturing sector continued to contract in October as new businesses slump for two months in a row, an industry survey by S&P Global showed. The headline ASEAN manufacturing purchasing managers’ index (PMI) remained unchanged at 49.6 last month, signaling marginal deterioration in the overall health of the sector, according to S&P. 

The headline figure dipped below the neutral mark of 50.0, which separates contraction from expansion, for the second month running as five of the seven ASEAN nations surveyed posted contraction in October 2023. Malaysia remained the hardest hit with an unchanged PMI of 46.8 in October that marked its fourth consecutive months of shrinking factory activity. This was followed by Thailand (47.5) and Singapore (48.6), while the downturn was relatively softer in Myanmar (49) and Vietnam (49.6). 

Indonesia and the Philippines were the only nations that saw their local manufacturing industries improve in October with a headline PMI of 51.5 and 52.4, respectively. S&P traced the region’s extended manufacturing slump to declining new orders and a sustained slowdown in output. This prompted factories to cut back on their buying activity for the first time in over two years, draining their inventories.

“If demand continues to soften, we could see manufacturers reducing their output in the coming months,” said Maryam Baluch, economist at S&P Global Market Intelligence.

On a positive note, the market slowdown helped temper inflation as seen in costs of input materials and output prices rising at muted rates. ASEAN manufacturers remained optimistic that production will continue to grow in the coming year despite weakening market conditions. The level of confidence, however, was lower than historical average.

“Global economic headwinds continue to cloud the outlook, including the subdued economic recovery in China and the lagging effects of monetary policy tightening across the majority of the ASEAN constituents and elsewhere,” Baluch said.

S&P Global said Malaysian manufacturers experienced a challenging business environment again at the start of the final quarter of 2023 as demand conditions continued to wane. It noted that new orders moderated and production was scaled back. Employment also eased, but firms were still able to deplete backlogs of work to the greatest extent since the survey began in July 2012.

As at 16 November 2023, the ringgit reportedly closed easier against the US dollar as the greenback rebounded from an over two-month low earlier this week on the back of a stronger-than-expected US retail sales data. 

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