In 2024, the global semiconductor sales reached US $630.5 billion (Semiconductor Industry Association, 7 Feb 2025). The US-China trade and tech rivalry has caused disruptions in the supply of essential components such as microchips (chips) made from semiconductors. In this context, Southeast Asian chip producers could contribute towards stabilizing the microchip supply chain in a few key areas.
The semiconductor industry is technology- and capital-intensive, and the global structure of the semiconductor industry is reflective of the specialization in various activities in the supply chains. The high degree of specialization and collaboration among countries led to comparative advantages but also led to geographical concentration (Tsun, 28 September 2022).
The global chip industry is dominated by the Taiwan Semiconductor Manufacturing Company (TSMC), which produces approximately 61 percent of the global chip supply and 90 percent of the most advanced variety (Economist, 6 Mar 2023). However, TSMC and its microchip ecosystem are in Taiwan, just 100 miles off China’s coast, and are a potential chokepoint for the supply of chips (Economist, 13 June 2024).
The United States (US) is trying to reduce its reliance on Chinese manufacturing by encouraging TSMC to build a plant in the US, subsidizing alternative chipmakers, and restricting China’s advanced chip production (Reuters, 27 December 2021).
The total application, packaging, and testing (APT) area in the chip supply chain is another potential choke point. Most APT activities occur in Taiwan (53% in 2019) and the People’s Republic of China (PRC) (more than 20%). Even Amkor, the only large APT firm headquartered in the US (in Arizona), is of South Korean origin, and 19 of its 20 manufacturing operations are in East and Southeast Asia (Yeung, Huang, and Ying, 2023).
The global semiconductor testing market is expected to record a CAGR of 7 percent from 2023 to 2032. The global packaging testing services market size reached US$ 20.50 billion in 2024 and is projected to hit around US$ 34.20 billion by 2034, expanding at a CAGR of 5.25 percent during the forecast period from 2025 to 2034.
This is where Southeast Asia and its chip producers could play a leading role to mitigate disruptions to the chip supply chain. Malaysia controls 13 percent of the global market in APT services for chips. That figure will continue to rise in the coming years. Intel, for example, is now constructing its first overseas facility for advanced 3D chip packaging in the country. Taiwanese company Advanced Semiconductor Engineering (ASE), the world’s leader in APT, has been operating in Malaysia for over 30 years (Businesswire, 18 Feb 2025).
Malaysia’s continued momentum to grow this sector will be complementary to Singapore’s role in the microchip ecosystem. Malaysia plays a critical role in the assembly and testing of chips, while Singapore has leading companies carrying out R&D along with wafer fabrication work (Diplomat, 29 May 2024). Singapore supplements its regional counterparts to provide an attractive location for upstream chip manufacturing, benefitting other Southeast Asian markets.
ASE plans to further invest $300 million in Malaysia over the next five years. At the same time, Marketech International, a leading Taiwanese equipment supplier to TSMC and ASML, is finalizing a project to build new production sites in Malaysia. Singapore, though more widely known as a financial hub, is also a sophisticated player in the semiconductor industry.
Singapore is a critical node in the global semiconductor supply chain, contributing one in 10 chips worldwide and one-fifth of global semiconductor equipment production. Today, the industry accounts for nearly six percent of Singapore’s GDP and employs around 35,000 people (EDB, 20 August 2024).
The Singapore semiconductor market is worth US $49.06 billion in 2025. Singapore has also developed a highly integrated ecosystem that spans the entire semiconductor value chain. From research and development (R&D) to manufacturing, assembly, testing, and packaging, the country accommodates both multinational corporations and small-to-medium enterprises (SMEs) involved in wafer fabrication and related processes (Diplomat, 1 December 2023).
The Singapore chip ecosystem has been enhanced since U.S. chipmaker GlobalFoundries opened a $4 billion manufacturing plant. Vanguard International Semiconductor, an affiliate of TSMC, is also planning to build its most advanced manufacturing facility in Singapore (Nikkei, 23 October 2023).
Other chip investors in Singapore include Taiwan’s United Microelectronics, which is building a $5 billion plant nearby. In addition, Applied Materials, a U.S. semiconductor equipment maker, has started construction of a new $450 million factory in the city-state. As part of its eight-year expansion plan named “Singapore 2030,” the company will increase its workforce there by around 40 percent to more than 3,500.
**Ongoing and Future Investments**
Southeast Asian chip producers such as Singaporealsooffer access to major Asian markets, including China, Taiwan, Japan, South Korea, and the ASEAN region. This geographic advantage allows semiconductor companies to efficiently manage supply chains and distribute products globally.
The manufacture of chips requires a stable supply of electricity. Singapore offers stable power grids, ensuring uninterrupted operations crucial for semiconductor production. Advanced water treatment and waste management systems further enhance the country’s appeal to semiconductor manufacturers. Furthermore, given the large scale of investments required for chip production, Singapore’s domestic political stability and relative geopolitical neutrality further enhance its attractiveness as an FDI destination for chip companies.
Connectivity is another vital component in the chip supply chain networks. Based on the 2023 Logistics Performance Index (LPI), Singapore is ranked 1st, with an LPI score of 4.3. Singapore’s efficient transportation and logistics infrastructure supports its role as a semiconductor hub. Semiconductor chips are usually transported by air freight in specialized containers. For example, in 2023, Singapore discharged nearly 920,000 tons of air cargo.
The growing global demand for semiconductors, particularly in emerging sectors such as electric vehicles (EVs), artificial intelligence (AI), and renewable energy, further drives the need for chips. The semiconductor sector in Singapore continues to attract significant investments. Notable examples include a US$7.8 billion joint venture by NXP Semiconductors and Vanguard International Semiconductor Corporation to establish a new silicon wafer manufacturing facility, slated to begin operations by 2027.
The proximity between Malaysia and Singapore helps to combine and amplify their distinct strengths in the semiconductor industry. Essentially, Malaysia’s growing APT cluster and Singapore’s increasing share in semiconductor manufacturing enable a chip to be produced and packaged for commercial applications at a close distance, hence insulating these clusters from supply chain disruptions.
Besides Malaysia and Singapore, other Southeast Asian countries like Thailand are competing for a share of the chip’s business. For example, Thailand’s Board of Investment (BOI) said it would propose new measures to fast-track investments in upstream manufacturing to the government under Prime Minister Paetongtarn Shinawatra, with a focus on two main industries; they are semiconductors and batteries (The Nation, 6 September 2024).
Thailand’s eastern neighbor, Vietnam, meanwhile, is drafting a new digital technology industry (DTI) law that offers several privileges to global chip makers investing in the country (The Star, 6 Sept 2024). Reportedly, the DTI law offers up to a 150 percent tax rebate on research and development expenses of new innovations, as well as up to 10 years’ free usage of land and fast-track visas for foreign experts. Companies investing more than US$160 million would be entitled to fast-track registration and exemption on selected raw materials and equipment.
In Vietnam, the US semiconductor giant Nvidia is in talks with Vietnam’s FPT Corporation to build a research and development facility for AI technology. Netherlands’ chipmaker Besi also announced an investment of US$164 million in Vietnam (The Nation, 6 September 2024).
The Southeast Asian chip producers are enhancing their capacity to increase production. Although competitors, they would need to find comparative advantage and increase their ability to coordinate among themselves to ensure the region remains attractive for foreign investors. Their potential capabilities to produce across the entire chip value chain and connectivity to regional and global markets make the region valuable for chip investors (McKinsey, 5 September 2024).
However, China and the US rivalry in the Southeast Asian region could impact the regional chip production and supply chain. As the fifth largest economic grouping with approximately 680 million inhabitants, the region needs to accelerate its economic integration. The regional bloc of the Association of Southeast Asian Nations (ASEAN), in which the region’s ten states are members, has implemented efforts to strengthen coordination in regional supply chain resilience (ASEAN Report, 2024).
The ASEAN region is welcoming of foreign investments, and the China +1 strategy is being used by key chip producers to extend their manufacturing capacity in Southeast Asia. The region could act as a key connector in the bifurcation of supply chains. It is critically important that both the US and China and other major powers have large investments and business stakes in the region. This could potentially act as an effective deterrent against potential disruptions to the chip supply chain networks.