In an era where the tussle for technological supremacy is becoming increasingly fierce, Southeast Asia is rapidly emerging as the new hub for the artificial intelligence (AI) and chip industry.
With escalating tensions between Beijing and Washington pushing tech multinationals to diversify their manufacturing bases away from China, Southeast Asia is witnessing a significant influx of tech investments. This inflow is not just reshaping the regional economies but is also repositioning Southeast Asia as a formidable player in the global tech landscape.
The Great Tech Migration
In the past couple of years, tech multinationals have been diversifying their manufacturing bases from China, largely in response to the intensifying trade war between the United States and China. This shift has been accelerated by the COVID-19 pandemic, which exposed the risks of over-reliance on a single manufacturing hub.
According to the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) into Southeast Asia reached a record $156 billion in 2019, surpassing China for the first time. Companies such as Google, Amazon, and Microsoft are increasingly looking to countries like Vietnam, Indonesia, and Thailand as viable alternatives for manufacturing and data centers.
Boomtowns and Economic Transformation
This massive influx of tech investment is transforming smaller towns in Southeast Asia into booming tech hubs. Bac Ninh in Vietnam, home to Samsung’s largest mobile production base, and Batam in Indonesia, where Apple supplier PT Pegatron Technology Indonesia is located, have seen significant economic growth.
Bac Ninh’s gross regional domestic product (GRDP) grew by 19.2% in 2019, one of the highest in the country, while Batam, once a sleepy fishing village, is now a bustling city with a GDP growth of 6.2% in 2019. These figures, compared to the global average GDP growth rate of 2.9% in the same year, demonstrate the transformative impact of these tech investments.
The AI and Chip Industry Revolution
Beyond manufacturing, Southeast Asia is also seeing a surge of investments in AI and chip technology. The global AI market is expected to reach $202.57 billion by 2026, according to Fortune Business Insights, and Southeast Asia, with its young, tech-savvy population, is ideally positioned to capitalize on this trend.
In Singapore, the government has committed $500 million over the next five years to boost AI research and adoption. Major chip manufacturers like Intel and Qualcomm have also established regional headquarters in Singapore, contributing to the city-state’s reputation as a global semiconductor hub.
Challenges Ahead
While the tech boom presents a significant opportunity for Southeast Asia, challenges persist. The region still lags behind in terms of infrastructure and skilled workforce. According to the World Bank, only 58% of the population in Southeast Asia has internet access, compared to 89% in China.
Moreover, the influx of tech investments has led to skyrocketing property prices and an increase in socio-economic inequality. There are also concerns about environmental sustainability, as manufacturing operations put pressure on the region’s resources.
Despite these challenges, the tech migration to Southeast Asia presents a golden opportunity for the region to step up its economic game and establish itself as a global tech powerhouse. With the right policies and investments in infrastructure and education, Southeast Asia could well be on its way to becoming the next Silicon Valley.
