Can Southeast Asia find footing as a semiconductor powerhouse in global chip ecosystem?
Estimated reading time: 6 minutes
To further grow its semiconductor ecosystem and carve out a competitive niche for itself, Southeast Asia needs to evaluate its strengths relative to leaders in the worldwide supply chain. SEA President of SEMI, Ng Bee Bee, shares what is brewing on her mind, about the future of the industry in this region.
EITN: What would it take for SEA to take on more established semiconductor ecosystems and supply chain in, say, Taiwan and Korea?
Ng Bee Bee: To further grow its semiconductor ecosystem and carve out a competitive niche for itself, Southeast Asia needs to evaluate its strengths relative to leaders in the worldwide supply chain and draw lessons from them.
Taiwan does a commendable job hosting a complete semiconductor ecosystem on a small island, offering both operational and collaboration efficiency with an entire microelectronics supply chain accessible within 2-3 hours of travel. The establishment of Hsinchu Science Park was key as a one-stop centre for all semiconductor activities – from design to fabrication and packaging and testing – providing the necessary infrastructure for industry players to grow their businesses.
Taiwan also offers a range of business models including Foundry, Outsourced Semiconductor Assembly & Test (OSAT), and Contract Manufacturing, enabling it to work seamlessly with any electronics manufacturer in any region without risk of customer conflicts.
Close collaboration between Taiwan’s semiconductor players and academic institutions also provide a steady pipeline of engineering talent that is contributing to Taiwan’s thriving semiconductor sector and facilitating R&D to spur industry-wide innovations.
Taiwan also offers a range of business models including Foundry, Outsourced Semiconductor Assembly & Test (OSAT), and Contract Manufacturing, enabling it to work seamlessly with any electronics manufacturer in any region without risk of customer conflicts.
While Southeast Asia has a fragmented semiconductor market, countries in the region have different strengths that allow it to become a force to be reckoned with in the larger ecosystem.
Korea’s strengths lie in the presence of large conglomerates, such as Samsung Electronics, SK Hynix and LG Electronics, that are driving huge investments in the industry. As a result, Korea’s supply chain has seen strong growth due to the huge global markets these industrial giants serve. The government’s strong push for universities to open more engineering schools during the meteoric rise of the electronics industry in the 1970s is also bearing fruit today, with a large talent pool lifting the industry.
While Southeast Asia has a fragmented semiconductor market, countries in the region have different strengths that allow it to become a force to be reckoned with in the larger ecosystem.
With the examples of Taiwan and Korea in mind, the Southeast Asia region needs to identify its strategic strengths and forge strategic alliances based on those strengths. Strategic partnerships will facilitate greater knowledge-sharing and the pooling of talent and investments to buttress R&D and innovation in the industry. This will help establish a foothold for Southeast Asia in the global semiconductor ecosystem – both in the supply chain and in contributing to the industry’s talent pool.
EITN: What are the positive features that SEA as a region has right now to build its own semiconductor ecosystem and supply chain?
Ng Bee Bee: Southeast Asia has a growing labour force with a relatively young population, and Vietnam stands out as a prime example. According to the country’s 2019 Population Census Report, 55.5 percent of the Vietnam population is under 35 years of age, with its labour force participation rate at 68.5 percent, the highest in the region.
The International Labour Organisation also predicts that ASEAN nations will record the second-largest growth in labour force worldwide by 2030, trailing behind only India, and another 59 million people are projected to enter the ASEAN workforce by 2030. This immense workforce potential will mean abundant opportunities for the Southeast Asia semiconductor ecosystem to tap a growing talent pool and position itself as a region on the leading edge of innovation.
Southeast Asia has a growing labour force with a relatively young population, and Vietnam stands out as a prime example.
Furthermore, Southeast Asia already has a substantial manufacturing presence, with a robust position in Outsourced Semiconductor Assembly and Test (OSAT) in particular, which serves as a great foundation to expand the region’s ecosystem. Investments into the ecosystem are also ramping up, with Singapore announcing a budget of S$25 billion under the country’s Research, Innovation and Enterprise 2025 Plan to map its course for the next few years.
In Singapore, its semiconductor industry accounts for some 20 percent of total business expenditure on R&D (BERD), making it one of the largest contributors to Singapore’s private sector R&D expenditure. These investments have enabled the transformation of novel concepts into commercialisable technologies such as silicon photonics, which is the backbone technology of 5G communications, cloud computing and autonomous vehicles.
EITN: There was major disruption to the industry and supply chain last year and some reactions were countries saying they want to be self-sufficient. China is one of them. Others may have the heft and resources and demand to pull it off as well. But, are they still saying the same thing now? How is the scene playing out? How do you foresee it eventually becoming after all the dust has settled?
Ng Bee Bee: The global semiconductor industry is a co-dependent ecosystem of regions throughout the world that contribute their distinct competitive strengths. Some may lead in R&D-intensive activities due to their world-class universities and large pool of engineering talent, while others may have expertise in wafer fabrication, assembly, packaging and testing – but all play a role in the grand scheme of things.
SEMI, the trade association representing the global electronics design and manufacturing industry, advocates for a sustainable, dependable, and secure global supply chain. Generally, to avoid disruptions it is vital for China or any other region to diversify supply chains with both international and domestic suppliers. Full self-sufficiency is not efficient or productive for any region or country and will have negative impacts on the global supply chain and industry.
As the largest semiconductor market in the world, China will continue to be viewed as a critical space for many multinational corporations (MNCs). Given the market opportunities, China’s integrated circuit (IC) industry will continue to grow at a rapid pace.
EITN: When the U.S. VP came to Asia, she visited Singapore and Vietnam citing them to be crucial for trade relationship building when it comes to the semiconductor industry. Does this mean the industry players for processors and semiconductors in SEA will converge upon these two countries?
Ng Bee Bee: VP Kamala Harris’ visit to Asia does demonstrate the focus in the U.S. and other large nations on maintaining the health of the global semiconductor supply chain.
Singapore and Vietnam are two nations witnessing favourable semiconductor industry growth. Recently, leading semiconductor manufacturer GlobalFoundries announced plans to build a new wafer fabrication plant worth US$4 billion in Singapore to meet growing demand for semiconductors triggered by the emerging 5G market. The island nation accounts for about 5 percent of global wafer fabrication capacity and 19 percent of the global semiconductor equipment market share.
Singapore and Vietnam are two nations witnessing favourable semiconductor industry growth.
In Vietnam earlier this year, U.S. chipmaker Intel injected US$475 million into its Vietnam division to build the most modern chip testing and assembling facility in the Ho Chi Minh City Hi-Tech Park, bringing Intel’s total investment in Vietnam to US$1.5 billion. According to market research firm Technavio, the semiconductor industry in Vietnam is poised to grow by US$6.16 billion from 2020 to 2024.
The future of SEA’s semiconductor ecosystem is promising and will contribute significantly to the economic growth of the region while creating new jobs.