The intensifying global race for semiconductor dominance, driven by the ongoing tech rivalry between the United States and China, is reshaping global supply chains and economic dynamics. This race has significant implications for several ASEAN countries, including Malaysia, the Philippines, Singapore, Thailand, and Vietnam, strategically positioning themselves in the complex semiconductor competition.
The semiconductor race unveiled
Semiconductors are crucial components across various industries, from artificial intelligence (AI) applications to electric vehicles (EVs) and advanced technologies. In 2020, the United States held a dominant 47% share of the global semiconductor market, followed by South Korea (20%), Japan (10%), the EU (10%), and Taiwan (7%). Leading market players in 2022 included Samsung, Intel, SK Hynix, Qualcomm, and Micron Technology.
The battle for control
The global semiconductor race escalated in October 2022 when the US announced export control policies targeting AI and semiconductor technologies destined for China. These measures aimed to limit China’s access to and ability to produce advanced chips. They encompassed high-end AI chips, AI chip design, electronic design automation software, semiconductor manufacturing equipment, and equipment components. These restrictions have impeded China’s semiconductor progress and compelled the country to rely more on domestic suppliers.
Global ramifications
In response, Japan and the Netherlands introduced export rules to control semiconductor technology exports to China, citing national security reasons. China, in turn, imposed restrictions on the exports of critical semiconductor raw materials—gallium and germanium—in July. These materials are integral to producing high-tech products like chips, solar panels, and EV batteries, making China’s export ban significantly disrupting global supply chains.
ASEAN’s emerging role
Amid this semiconductor race, ASEAN, comprising nations constituting the world’s fifth-largest economy, is poised to play a pivotal role. The region offers strengths that can position it as a key player in the semiconductor industry, including growing manufacturing capabilities, skilled labor, and supportive government policies.
ASEAN’s semiconductor exports
While the US and China accounted for semiconductor exports of $28.4 billion and $220 billion globally in 2022, ASEAN’s semiconductor exports exceeded $165.3 billion, up from $52.3 billion in 2017. The region’s semiconductor market revenue is projected to reach $101.8 billion this year, highlighting its immense potential in this specialized supply chain.
Key players in ASEAN
Singapore and Malaysia have significantly contributed significantly to the global semiconductor supply chain. Singapore boasts substantial wafer fabrication capabilities, constituting 5% of global wafer capacity. Meanwhile, Malaysia plays a pivotal role in assembly, testing, and packaging activities, further cementing ASEAN’s relevance in the industry.
ASEAN’s investment growth:
In 2021, ASEAN witnessed a 42% increase in foreign direct investment (FDI) inflows, reaching $174 billion. Electronics and semiconductor investments recorded notable growth, with disruptions in the global semiconductor supply chain driving expansion, particularly in Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
ASEAN’s trade relations
Trade between ASEAN member states and the US surged from $135.1 billion to $452.2 billion, with semiconductor exports growing by approximately 80% to $9 billion. Trade with China reached a remarkable $975.3 billion in 2022, marking a 24-fold increase since 2000. Semiconductor exports from ASEAN to China reached $26.6 billion in 2022, reflecting a 176% increase since 2017.
ASEAN’s advantageous position
ASEAN’s strengthening trade and investment relationships with the US and China and growing geopolitical tensions between these major powers position the region advantageously.
Maintaining neutrality amid geopolitical tensions
As ASEAN economies maintain deep connections with the US, Europe, China, and East Asia, the bloc must maintain a neutral stance in the escalating US-China rivalry. Avoiding taking sides is essential, emphasizing collaboration, diverse trade partnerships, and economic relationships to maximize opportunities and improve trade and investment prospects.
Strategic moves for ASEAN:
ASEAN must prioritize investments in research and development, particularly in AI research, to bolster semiconductor innovation and manufacturing capabilities. Streamlining regulations and standards across the region is crucial to establish clear regulatory frameworks and facilitate trade. Additionally, investing in education and training programs will equip ASEAN with a skilled workforce, vital for its long-term development in the semiconductor industry.
Fueled by the US-China tech rivalry, the global semiconductor race has brought ASEAN to the forefront of this evolving landscape. With its inherent strengths and growing capabilities, the region has the potential to become a vital hub in the semiconductor industry. ASEAN must maintain a neutral stance, prioritize research and development, streamline regulations, and invest in workforce development to maximize its role. As the race for semiconductor supremacy continues, ASEAN’s strategic positioning becomes increasingly pivotal in shaping the industry’s future.
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