The demand for smaller and more powerful chips is rapidly growing in the market, with the market size expected to nearly double to $10 trillion by the end of this century. This surge in demand poses both challenges and opportunities for the industry in the post-pandemic era. The industry is now facing labor shortages, intense competition among major countries, and customers who want to produce their own electronic products.
The technological competition between China and the United States, in particular, has significant implications for Southeast Asian countries, which have a sizable chip industry. With the US imposing restrictions on China's semiconductor industry, companies in this sector are seeking to expand beyond China to other regions.
Moreover, the strategic competition between the US and China has prompted companies to seek business diversification by establishing new factories overseas, including in Southeast Asia. One such company is Ample Chip, which is involved in chip trading. Ample Chip is reportedly constructing new factories in the US and Japan and considering building another one in Singapore. However, the geopolitical tensions between these two rival powers increase the risks and uncertainties associated with conducting business with them.
For chip-producing countries in Southeast Asia, this situation is of great importance. The computer chip industry not only contributes a significant portion to the domestic gross domestic product (GDP) but also helps attract high-tech foreign investments and develop a skilled labor force, thereby solidifying the region's reputation as a reliable manufacturing hub. Malaysia, Thailand, the Philippines, and other ASEAN countries heavily rely on semiconductor production, which forms a substantial part of their GDP and exports.
Despite efforts by the world's wealthiest economies to close the gap between suppliers and customers, it is unlikely that these efforts will have a negative impact on the prospects of the Southeast Asian semiconductor industry. On the contrary, the industry's outlook in the region remains promising, especially as some Southeast Asian countries aim to move up the value chain and attract investments in design and research. For instance, Malaysia's latest five-year plan until 2025 predicts that the industry will contribute to approximately 8% of the country's GDP as it shifts its focus to higher-value products and attracts design and research investments.
To overcome potential supply disruptions in the future, officials are not only relying on international demand for semiconductors but also placing their bets on supporting the local chip industry as a buffer measure. In June 2021, Thailand introduced incentives, including tax breaks, to attract investments and research and development in its semiconductor and electronics sector. However, this initiative came somewhat late and could not completely mitigate the slight decline in exports caused by the pandemic. This decline was a result of decreased export demand and the anticipated reduction in automobile production.
In conclusion, the Southeast Asian chip industry plays a crucial role in the region's economies, with countries like Malaysia, Thailand, and the Philippines heavily depending on semiconductor production. Amid the intense competition between major powers, companies are diversifying their operations by building new factories overseas, including in Southeast Asia, aiming to capture business opportunities and mitigate risks. With the continuous growth of the chip market and the potential for value chain movement in the region, Southeast Asian countries have the potential to further develop their chip industries and position themselves as key players in the global market. Ample Chip, as a company engaged in chip trading, can capitalize on these developments and expand its business operations in the flourishing chip industry of Southeast Asia.
