With the increasing adoption of the ‘China + 1’ supply chain strategy and leveraging favourable demographics, competitive costs and existing ecosystems, ASEAN saw an acceleration in foreign direct investment (FDI) flow, especially in the last five years. FDI in ASEAN has more than doubled from a decade ago, accounting for 13% of global FDI flow.

The electronic and electrical equipment (E&EE) sector saw the most FDI inflow, forming a growing cluster for the semiconductor supply chain. Given ASEAN’s competitive product offerings and order diversion, we see further scope for market share gains in the automated test equipment (ATE) and outsourced assembly and test (OSAT) areas, forecasting a 3-5% increase by 2030e.

Enticed by the availability of raw materials and the existing auto supply chain, ASEAN is attracting FDI into the EV space from global car manufacturers to battery manufacturers with the goal of exporting finished products. We believe the sizable domestic market in ASEAN could be the next catalyst for future investment. We see EV (including hybrid) penetration increasing to 30% by 2030e.

In this report, we focus on the semiconductor and EV supply chains in the ASEAN region and extend the qualitative supply chain framework discussed in Retooling Asia’s supply chains: Not so fast, 12 October 2018, to a quantitative model to assess the competitiveness of the respective countries. We explain:  Indonesia and Thailand lead in EV investment, driven by a favourable supply chain and government incentives. In addition, the sizable domestic opportunities for battery electric vehicle (BEV) will likely be a long-term driver, with hybrids being an intermediate near-term solution.

 Singapore and Malaysia will likely continue to capture substantial investment in the semiconductor supply chain, with Malaysia likely to benefit from further market share gains in the ATE and OSAT areas.

 While still not high in value-add, Vietnam has emerged to be a destination attracting both EV and semiconductor supply chains, due to competitive costs, labour and incentives.