Southeast Asia chip sector seen holding up

US President Donald Trump's plan to impose 25% tariffs on semiconductors may push chipmakers to establish US facilities to avoid levies, potentially reducing Southeast Asia's key role in the supply chain, but it won't halt the industry's global expansion, experts say.

Lower costs and experienced partnerships with the electronics sector will still help the region draw continued investments in the chipmaking industry, even as it faces new pressures, they said.

Rujipun Assarut, a senior researcher with the Kasikorn Research Center in Bangkok, said the US will find it difficult to gain unshakable competitiveness in the semiconductor industry due to the higher cost of production in the country.

"ASEAN countries still enjoy advantages, particularly in terms of assembly and testing," Rujipun said.

As Southeast Asia's major production base for home appliances and electric vehicles, and given its strengths as a regional logistics center, Thailand has great advantages for the development of the semiconductor industry and attracting foreign investment, Rujipun said.Thailand is a hub for EV production, hosting partnerships with Chinese automakers. Apart from this, the kingdom's new digital development plan and promotion of artificial intelligence technology mean "great market potential" for the local chip industry, according to Rujipun.

The analyst noted that the global semiconductor supply chain is remarkably complex, segmented, and international.

Hyping the notion of "supply chain security" and positioning chips as strategic assets, the Trump administration is ramping up protectionist measures with new import tariffs and encouraging more production within the US.

"The US strategy aims to boost (the nation's chip) self-reliance and market segregation, pushing those companies with overseas investment back to the US. Such policy has altered the course of globalization," said Bank Ngamarunchot, director of the Science Technology and Innovation Policy Institute at the King Mongkut's University of Technology Thonburi.Shifting trend

The global semiconductor industry has been roiled in recent years. Some supply chains have shifted to Southeast Asia. Thailand saw a 35 percent surge in foreign investment applications last year, according to the Thailand Board of Investment.

A recent report by consulting firm A.T. Kearney indicated that the kingdom ranks second behind India in an analysis of top emerging economies for semiconductor manufacturing.

The chip sector, together with electric vehicles, has the potential to spur economic growth in Thailand, as well as other countries in the region that have long been prepared for the industries' emergence, Thai Prime Minister Paetongtarn Shinawatra said on Sunday.

In September 2024, research firm Gartner projected a 13.8 percent rise in global semiconductor revenue this year. The surge would be primarily driven by AI chips.

"The US sanctions on Chinese tech firms and (Washington's) current attempts to guarantee its influence on major industries via tariff increase will disrupt global industrial and supply chains," said Sheng Linghai, vice-president of research at Gartner.

Sheng noted that the chip industry is one of the most globalized industries. "Any policy targeting a certain country or region will result in a global impact," he said.

As the only country in the world that owns a complete chip industrial chain, China is steadily moving forward and strengthening its competitiveness via innovation to enhance its resilience against risks, according to Sheng.

He called for Southeast Asian companies in the upstream and downstream sections of the chip industrial chain to strengthen cooperation, master core technologies and develop homegrown chips.

(2025/03/06-00:00)