The semiconductor industry (Image courtesy of Yonhap)
SEOUL, Nov. 28 (Korea Bizwire) – A new report suggests the ASEAN semiconductor industry, traditionally strong in chip packaging, is poised for continued growth as global firms seek to diversify supply chains beyond China amid ongoing U.S.-China competition in the semiconductor sector.
The International Trade Research Institute at the Korea International Trade Association reported on November 27 that Malaysia, Singapore, and Vietnam have emerged as prime beneficiaries of major investments from global semiconductor companies pursuing “China+1″ strategies to establish production bases outside China.
The three nations collectively accounted for 19.5% of global semiconductor exports in 2022, with particularly strong growth rates surpassing both China and South Korea. Between 2014 and 2022, Malaysia and Vietnam recorded average annual semiconductor export growth of 10.7% and 27.3% respectively, compared to China’s 9.9% and South Korea’s 9.3%.
Malaysia, ranking fifth globally in semiconductor exports, handles 13% of worldwide Assembly, Test and Packaging (ATP) operations. Its Penang region has become a thriving semiconductor cluster attracting steady investment.
As major players like Intel, Samsung, and GlobalFoundries expand their presence in these ASEAN nations, Chinese firms are also increasingly relocating to avoid U.S. restrictions. In Penang alone, the number of Chinese semiconductor companies has jumped from 16 to 55 following U.S. sanctions on China.
The three governments are actively strengthening their positions as semiconductor manufacturing hubs through corporate tax incentives, workforce development programs, and ecosystem building initiatives.
The report notes that ASEAN’s semiconductor industry, focused on assembly, testing, and packaging operations, is largely insulated from U.S. restrictions targeting advanced technology and equipment. Packaging, which relies on standard equipment and company expertise, is particularly resistant to sanctions.
Even if the new U.S. administration tightens semiconductor-related sanctions and promotes domestic advanced packaging production, the report predicts continued collaboration between global semiconductor firms and ASEAN countries due to surging demand for advanced packaging.
The report recommends that South Korea, which has relatively weak backend processing capabilities, should strengthen cooperation with these three ASEAN nations and expand its presence in the region.
“ASEAN is both a strategic hub for diversifying semiconductor supply chains and a potential partner for strengthening South Korea’s backend processing capabilities,” said a KITA representative.
“Given varying levels of U.S.-China cooperation across ASEAN countries, it’s crucial to develop tailored cooperation strategies and risk diversification aligned with the new U.S. administration’s trade policies.”
Kevin Lee (kevinlee@koreabizwire.com)
