Southeast Asia’s Semiconductor Race: Can the Region Move Up the Value Chain?

For decades, Southeast Asia has been an important manufacturing base for the global electronics industry. Governments across the region are now working to move further up the supply chain through semiconductors.

Demand for semiconductor chips is expanding in parallel with artificial intelligence, data centres, electric vehicles, connected devices, and advanced manufacturing. At the same time, recent geopolitical events have led companies to realise the importance of supply chain resilience and therefore reassess where and how they manufacture critical components.

Governments across the region are responding to this opportunity with investment incentives, industrial strategies, research funding, workforce programmes, and new infrastructure. Each government is, however, responding in its own way, leveraging the country's resources and existing capabilities. Malaysia is building on its established assembly and testing base by moving into advanced packaging, chip design, and semiconductor equipment. Singapore is capitalising on its advanced manufacturing capabilities by investing heavily in semiconductor research. Vietnam is developing domestic design and manufacturing capabilities, while Thailand is targeting specialised areas such as power semiconductors, sensors, and photonics. The Philippines is looking to build on its electronics manufacturing base by moving further into design and engineering, while Indonesia is developing the foundations of a broader semiconductor ecosystem.

The result is a regional race for investment, technology, talent, and higher-value activities. The question is whether these national ambitions will ultimately compete with one another, or become part of a larger regional semiconductor ecosystem.

Six Countries, Six Different Starting Points

Competition is not linear, as each country is building on a different starting point, with governments targeting parts of the semiconductor value chain that align with their existing industrial capabilities.

Malaysia: moving beyond assembly and testing

Malaysia is one of the region's most established semiconductor markets. Its National Semiconductor Strategy aims to move the country beyond outsourced semiconductor assembly and testing into areas including integrated-circuit design, advanced packaging, and semiconductor equipment.

This shift is also visible in Malaysia's broader investment policy. The New Incentive Framework, which took effect for manufacturing in March 2026, links investment incentives to outcomes such as higher-value jobs, domestic supply-chain linkages, industrial clusters, and sustainability. Collectively, these measures strengthen Malaysia's position further up the semiconductor value chain.

Singapore: betting on research

Singapore has chosen a different approach, combining advanced manufacturing with research and development. In 2026, the government committed S$800 million to semiconductor research under its Research, Innovation and Enterprise 2030 (RIE2030) programme, including research into areas such as advanced packaging and photonics.

The government is also building supporting infrastructure, including the S$500 million National Semiconductor Translation and Innovation Centre, while Micron has begun construction of a new advanced wafer fabrication facility.

Vietnam: expanding across the value chain

Vietnam is expanding across multiple parts of the value chain. The country is developing domestic chip design and prototyping capabilities alongside established operations from companies such as Intel, Amkor, Samsung, and Hana Micron.

In January 2026, Viettel, the country's military-run telecommunications and technology group, broke ground on Vietnam's first semiconductor chip manufacturing plant at Hoa Lac. The 27-hectare facility is intended to support research, design, testing, and chip production, with trial production targeted from 2027.

Thailand: specialising in power semiconductors, sensors, and photonics

Thailand is pursuing a more specialised strategy. In September 2026, the government approved its first National Semiconductor and Advanced Electronics Industry Development Strategy, setting out a long-term plan to build capabilities across the semiconductor and advanced electronics value chains. The country's focus on power semiconductors, sensors, and photonics is increasingly attractive for manufacturers of electric vehicles, renewable energy systems, industrial automation, communications, and data centres.

The strategy is designed to strengthen Thailand's existing assembly and testing capabilities first, while gradually developing higher-value activities such as chip design, advanced packaging, and eventually wafer fabrication. The government has set a target of attracting around THB 500 billion in investment by 2030, with a longer-term ambition to build a more complete domestic semiconductor ecosystem by 2050.

The Philippines: pairing industrial policy with infrastructure

The Philippines is building on its long-established electronics and semiconductor manufacturing base. Its Semiconductor and Electronics Industry Roadmap, launched in September 2026, seeks to move the country beyond traditional assembly and manufacturing into higher-value activities such as chip design, engineering, research, and innovation.

The roadmap targets US$110 billion in annual semiconductor and electronics exports by 2030, while the government is also using infrastructure initiatives such as the Luzon Economic Corridor to support new investment. To move further up the value chain, the country is combining industrial policy with infrastructure development.

Indonesia: laying the foundations

Indonesia, however, is still developing the foundations of its semiconductor industry. In January 2026, the Ministry of Industry outlined a national semiconductor roadmap covering four areas:

1. Material
2. Chip design
3. Fabrication
4. Assembly, testing, and packaging

The following month, the country's National Development Planning Ministry argued for the need for a longer-term strategy to integrate into global semiconductor value chains, highlighting the need to build talent, research, and industrial capabilities gradually. The country is still in an early-stage position in the industry, making its focus largely around the establishment of foundations for broader participation in the regional market.

Taken together, these strategies reveal how differently the semiconductor opportunity is taking shape across Southeast Asia. While some countries are building on established manufacturing strengths, others are investing in new capabilities and moving into higher-value parts of the supply chain. This creates competition for investment and talent, but it also raises a broader question: do these countries need to build the same capabilities to succeed?

What Still Holds the Region Back

The competition for semiconductor investment in Southeast Asia is intense, but building a competitive and successful semiconductor industry entails several factors. The industry depends on specialised talent, reliable power and water, advanced infrastructure, research capabilities, suppliers, and efficient logistics. Countries also need to build capabilities that can support companies beyond their initial investment.

The fabrication gap

This is important because the region's existing strengths are concentrated in assembly, testing, packaging, and electronics manufacturing rather than front-end wafer fabrication. According to the Semiconductor Equipment and Materials International (SEMI), 64 new semiconductor fabs (fabrication plants) are expected to become operational across Asia by 2029, but only six are planned in Southeast Asia. This highlights the gap between the region's established capabilities and the much more demanding requirements of large-scale chip fabrication.

Talent and infrastructure

Talent is another constraint. Semiconductor companies require engineers and specialists across chip design, equipment, materials, manufacturing, testing, and research. Governments are therefore putting greater emphasis on workforce development alongside investment incentives.

Infrastructure is also becoming a competitive factor, with semiconductor facilities requiring dependable electricity, large volumes of water, and supporting industrial and logistics networks. However, this does not mean that every country needs to develop the same capabilities. In fact, the fragmented nature of semiconductor production may allow different countries to specialise in different parts of the value chain.

Room to specialise

Semiconductor production is not concentrated in one place. A single chip can pass through several countries during its development and production, with different locations handling design, fabrication, packaging, testing, and integration. This makes the industry different from a conventional manufacturing sector where companies may choose one location for an entire production process. For Southeast Asia, this creates room for countries to build complementary strengths.

The opportunity, therefore, may not lie in one country becoming the region's dominant semiconductor hub. Instead, the region could benefit if these capabilities become more connected, allowing companies to use different locations for different stages of the semiconductor value chain.

Where ASEAN Fits In

This is where ASEAN's role becomes important. Rather than treating semiconductor development as a collection of separate national efforts, the region is beginning to focus on how these capabilities can work together. ASEAN adopted the ASEAN Framework for Integrated Semiconductor Supply Chains (AFISS) in 2025, with the aim of integrating semiconductor supply chains based on the different strengths of its member states.

In 2026, the Philippines also led the development of the ASEAN Semiconductor Roadmap 2026–2030, which focuses on four areas:

1. Talent development and mobility
2. Technology and infrastructure
3. Supply chains and strategic investment
4. Regional coordination

The roadmap is intended to move ASEAN beyond simply competing to attract foreign investment. It places greater emphasis on anchoring investment in the region through stronger links between companies, suppliers, research institutions, technology, and skilled workers.

For businesses, this could eventually make Southeast Asia more than a collection of individual manufacturing locations. A more connected regional ecosystem could allow companies to combine different national strengths while reducing some of the risks associated with relying too heavily on a single location.

What This Means for Businesses

Southeast Asia's semiconductor race is likely to become more competitive as governments invest in infrastructure, talent, technology, and higher-value manufacturing. But for companies looking to invest or diversify their supply chains, the challenge is not simply identifying where the next opportunity lies. It is understanding how quickly the policy, regulatory, investment, and infrastructure landscape is changing across multiple markets.

As countries develop new strategies and ASEAN moves towards greater regional integration, businesses will need to track developments across individual markets while also understanding how they interact with one another. Changes to investment incentives, industrial policies, workforce programmes, infrastructure plans, trade measures, and environmental requirements can all affect where and how companies operate.

The semiconductor race is not just a story about where the next factory will be built. It is a rapidly evolving policy and investment landscape, where having timely visibility across markets can help businesses identify opportunities, anticipate changes, and make more informed decisions. With PolicyNote, teams can gain actionable intelligence on how to navigate complex policy environments and stay ahead of potential challenges through insights provided by our award-winning global policy analysis, delivered right to your inbox.