US President Donald Trump is expected to visit the region next month during the 47th Asean Summit in Kuala Lumpur, scheduled for Oct 26-28. Meanwhile, when announcing fresh curbs on advanced semiconductors and threatened tariffs on countries, he accused them of “giving a complete pass to China’s largest tech companies”. The headlines once again framed the contest as a binary clash between Washington and Beijing. His administration’s new “AI Action Plan”, designed to choke off chip and AI equipment exports to China, reinforced the impression that the future of technology will be decided in a two-player game.
Well, could that framing be outdated? The next leap forward in the global digital economy might emerge from Southeast Asia, where vibrant countries passionately compete and innovate to carve out their own unique space in the tech landscape.
With over 650 million people, a median age under 30, and some of the world’s fastest-growing digital markets, the region has become a critical node in global value chains. Vietnam and Malaysia are indispensable in chip assembly and testing. Singapore hosts advanced fabs and AI research hubs. Indonesia and the Philippines are powering a surge in fintech, e-commerce, and AI-enabled logistics. Together, these economies are no longer just “China+1” alternatives — they are emerging as co-architects of the global technology order.
The lesson is clear: global supply chains are being rewired, with the US imports of electronic products from China falling from US$160 billion (RM674.08 billion) in 2020, before reaching a US$183 billion peak in 2022, to US$140 billion in 2024. In contrast, imports from Vietnam rose significantly, doubling from US$29 billion to US$60 billion between 2020 and 2024. Additionally, Malaysia and Thailand made gains, with imports growing to US$36 billion and US$31 billion, respectively. Multinationals are diversifying production networks, not abandoning China but building resilience by spreading operations across the region. This shift is about not only hedging geopolitical risk but also tapping into a region moving steadily up the value ladder, from low-cost assembly to design, testing, and even R&D.
Southeast Asian governments are trying to seize the moment. Singapore’s AI Singapore programme, Malaysia’s National AI Roadmap, and Vietnam’s push for semiconductor self-sufficiency show how policy aligns with industry needs. Universities are expanding science, technology, engineering and mathematics (STEM) programmes, while regional frameworks encourage talent mobility and digital integration. Penang’s electronics hub, Jakarta’s digital corridor, and Hanoi’s growing chip ecosystem are becoming innovation clusters that plug directly into global value chain networks. The market is rapidly evolving, driven by shifts in the global value chain, increasing local investments, and rising demand for artificial intelligence (AI), the Internet of Things (IoT), and automotive chips. Further, the growth of electric vehicles (EVs) in Thailand, Indonesia, and Vietnam is fuelling the demand for automotive chips. While the region may, for now, lag in the mass production of the most advanced semiconductors — Taiwan and South Korea still dominate cutting-edge fabrication — momentum is shifting. Malaysia already handles 13% of global back-end processing, Singapore produces 20% of global semiconductor equipment, and Vietnam has pledged to cover up to 50% of initial investment costs for chip and AI projects. With Southeast Asia’s semiconductor market projected to grow from US$110 billion in 2025 to US$212 billion by 2032, and with an annual growth rate of around 10%, the long-term trend tilts decisively in the region’s favour.
Meanwhile, Southeast Asia is attracting record capital inflows, with foreign direct investment (FDI) increasing two-fold from US$113 billion in 2020 to US$225 billion in 2024. This surge highlights the region's increasing significance as a hub for global production and innovation. While Singapore captured nearly two-thirds of Southeast Asia’s FDI in 2024, the real story lies in the rising shares of Indonesia and Vietnam, which are fast becoming the new anchors of global production networks in the region.
If the US sidelines Asean, it risks ceding influence in the region, becoming the connective tissue of global technology. Today, Southeast Asia can mount its own “moonshot”, a term that describes an ambitious, exploratory, and ground-breaking project in digital transformation. By leveraging its role in global value chains, investing in human capital, and fostering cross-border innovation, the region can leapfrog into a position where it is not merely a workshop for the world but a driver of the digital future.
The next chapter of the tech wars will be held in Jakarta, Hanoi, Kuala Lumpur, and Singapore. With Trump visiting Kuala Lumpur and engaging in vital trade discussions on semiconductors and tariffs, his presence holds the potential to significantly influence Southeast Asia's role in the evolving tech landscape. For investors and policymakers, this is less about ‘catching up’ to Taiwan and South Korea and more about defining complementary strengths in the global semiconductor ecosystem. This is an exciting moment for global attention.
Dr Bruno S Sergi is professor at Harvard University and University of Messina and Visiting Professor at Universiti Putra Malaysia. Vigneswari Palanimuthu is a PhD student in Economics at the School of Business and Economics, Universiti Putra Malaysia (UPM).