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Why ASEAN Could Be the Answer to the Global Chip Crisis — Part I

Oct 1
8 min read

From semiconductor vulnerability to regional opportunity, ASEAN has the ingredients to become one of the world’s most important alternative manufacturing hubs.


The semiconductor industry has become infrastructure for the modern economy. Cars, smartphones, data centers, medical equipment, artificial-intelligence systems and increasingly sophisticated defense technologies all depend on chips. Yet the supply chains behind those chips remain concentrated across a relatively small number of economies, companies and production facilities: Taiwan alone was projected to hold 44% of global foundry capacity in 2024 and 66% of advanced-process capacity Foundry Capacity Market Share of Advanced Process to Decline in Taiwan, Korea Until 2027, While US on the Rise, 2024 AI Demand Drives 4Q25 Global Top 10 Foundries Revenue Up 2.6%, 2026. The disruptions of recent years exposed just how costly that concentration can become.


ASEAN now has an opportunity to turn that vulnerability into a regional advantage. The region already plays an important role in semiconductor assembly, testing, packaging, electronics manufacturing and supporting industries. It accounts for around 23–24% of global semiconductor exports, according to Invest ASEAN, underlining the region’s central role in global production networks Advanced Manufacturing, 2026. More importantly, ASEAN is beginning to develop a coordinated strategy.


The ASEAN Framework for Integrated Semiconductor Supply Chain, or AFISS, was adopted in 2025 as a regional framework intended to strengthen supply-chain resilience, deepen industrial integration, support technology development, attract investment, and expand ASEAN’s role in global semiconductor value chains ASEAN Framework for Integrated Semiconductor Supply Chain, 2025 ASEAN Secretariat Annual Report 2025, 2026. The question is whether ASEAN can turn that framework into something more ambitious; a genuinely integrated semiconductor ecosystem capable of giving global companies more choices while giving Southeast Asia a larger share of the industry’s future value.


Key Facts



Understanding the Current Global Chip Crisis


The Fragility of Today’s Semiconductor Supply Chain

The global semiconductor industry is a highly interconnected system involving chip design, intellectual property, semiconductor equipment and materials, wafer fabrication, assembly, testing, packaging, and distribution/logistics. For example, the Taiwan Semiconductor Industry Association’s membership spans R&D, design, wafer manufacturing, packaging, testing, equipment, and materials Taiwan Semiconductor Industry Association: About TSIA, n.d. Overview on Taiwan Semiconductor Industry (2025 Edition), 2025. That complexity is a double-edged sword. It creates efficiency but also creates vulnerability.


Concentration Creates Systemic Risk

ERIA analysis notes the concentration of semiconductor market power across a small number of major economies and the strategic importance of Taiwan, South Korea, Japan, China and the United States within different parts of the semiconductor ecosystem ASEAN in the Global Semiconductor Race, 2024. The result is a supply chain where disruption at one location can have consequences far beyond its borders.


COVID-19 Exposed the Weaknesses

The COVID-19 pandemic demonstrated how quickly semiconductor shortages could spread through global manufacturing. Automotive producers were forced to reduce or temporarily halt production as chip supplies tightened, while electronics manufacturers faced longer lead times and intense competition for components Framework on ASEAN Supply Chain Efficiency and Resilience, 2024 ASEAN Leaders’ Declaration on Enhancing Supply Chain Connectivity, 2024.


Economic and Strategic Consequences


The Chip Problem Is Bigger Than Electronics

Semiconductor shortages can affect industries far beyond smartphones and computers. Automotive manufacturers, consumer electronics, and defence systems all require semiconductors in their technology. As economies digitize, semiconductor availability increasingly becomes an industrial-policy issue. ASEAN’s Vision 2045 identifies semiconductors as one of the strategic sectors in which industrial innovation, diversification and supply-chain strengthening will be necessary to sustain ASEAN’s global-value-chain participation ASEAN 2045: Our Shared Future, 2025.


The Hidden Cost Is Uncertainty

The cost of a semiconductor disruption is not limited to the price of the missing chip. There is a big ripple effect. Factories may sit idle, which may lead to production schedules being rewritten, which leads to inventory costs increasing. Companies may then need to redesign products around alternative components to continue business. For global manufacturers, therefore, resilience has an economic value of its own. However, having two viable suppliers may be more expensive than having one, but having only one supplier can become far more expensive when that supplier is suddenly unable to deliver.



Why Current Solutions Fall Short


National Strategies Cannot Solve a Regional Problem Alone.

Governments around the world have responded with their own semiconductor strategies. The United States, European Union, Japan, South Korea, China, and other economies have introduced policies designed to strengthen domestic semiconductor capacity 2026 Outlook: Global Semiconductor Supply Chain, 2026 U.S. Passes CHIPS Act, Increasing Restrictions on China Lead to Rising Geopolitical Risk, 2022 Japan Chip Development Policy Highlights Security and Revitalization, 2023. Those initiatives matter. But semiconductors do not respect national borders. A wafer fabricated in one country may be packaged in another, tested somewhere else, and incorporated into a product manufactured thousands of kilometers away.


ASEAN Needs a Regional Approach

Its earlier electronics-integration framework was designed around the objective of developing ASEAN as a single market and production base, while the newer AFISS initiative is explicitly focused on strengthening semiconductor supply-chain integration, resilience, technology, infrastructure, and talent development across ASEAN member states ASEAN Framework for Integrated Semiconductor Supply Chain, 2025 ASEAN Framework for Integrated Semiconductor Supply Chains, 2026. That is a fundamentally different proposition from every country trying to build the entire semiconductor ecosystem independently. ASEAN just needs one regional ecosystem with different national specializations.


ASEAN’s Competitive Advantages in Semiconductor Manufacturing


Map of ASEAN
Map of ASEAN

Geographic and Geopolitical Positioning

ASEAN sits between some of the world’s largest semiconductor producers, technology markets and manufacturing centres. Each country brings its unique skills to the table.


Singapore connects the region to global logistics, advanced manufacturing, finance and research capability. Meanwhile, Malaysia has established electronics and semiconductor manufacturing capabilities, especially in assembly, testing and packaging where it accounts for around 13% of global semiconductor packaging, assembly, and testing  Securing Malaysia’s Position in the Global Semiconductor Supply Chain, 2024 National Semiconductor Strategy to Guide Industry Up Value Chain, 2024. Vietnam and Thailand has become a core player in electronics production, semiconductor design and workforce as well as supporting industries with Philippines having the automotive and electronics manufacturing capabilities. Finally, Indonesia offers a huge domestic market and growing industrial capacity. Together, these capabilities create something no single member state can easily replicate ASEAN in the Global Semiconductor Race, 2024 ASEAN Investment Report 2025, 2025. Each member having their own specialty that can contribute to the semi-conductor industry can allow them to be a coherent ecosystem, where they can invest in their economy's but also support ASEAN overall economy.


ASEAN Is Not Outside the US–China Rivalry

ASEAN should not pretend it can simply avoid geopolitical competition. The region is deeply connected to both the United States and China. However, its advantage in this relationship is its diversification. A multinational company looking to reduce concentration risk can establish complementary operations across multiple ASEAN economies rather than relying exclusively on one production location. This gives them strategic relevance without requiring the region to choose one major power over another. Framework on ASEAN Supply Chain Efficiency and Resilience, 2024 ASEAN 2045: Our Shared Future, 2025.


Cost and Investment Advantages

ASEAN can also offer cost advantages compared with many developed manufacturing locations. But low costs alone are not enough. The more important advantage is the combination of cost, market access, industrial ecosystems, infrastructure and investment incentives.


ASEAN’s investment performance reflects this broader attraction. Regional FDI reached US$226 billion in 2024, with manufacturing investment increasing sharply and supply-chain-intensive industries such as automotive, electronics and semiconductors among the sectors driving investment ASEAN Investment Report 2025, 2025 ASEAN Next: Manufacturing FDI and Supply-Chain Investment, 2025. The semiconductor sector is particularly notable. ASEAN attracted approximately US$12 billion annually in semiconductor investment between 2021 and 2024, demonstrating that multinational companies are already treating the region as an important destination for capacity expansion. ASEAN Investment Report 2025, 2025.



The Foundation Already Exists


The most important point is that ASEAN does not have to start from zero. It has a strong foundation with semiconductor ecosystems, global companies, ports, industrial parks, electronics clusters, and technical workforce. All in place to support this growth. Now it has AFISS. The opportunity is to connect these pieces into something much larger. AFISS is intended to support ASEAN’s long-term transformation from a concentration of individual national activities into a more integrated and globally competitive regional semiconductor ecosystem Optimising Industry Linkages and Supply Chain Networks for Semiconductor Growth in ASEAN and East Asia, 2026.


That is where the idea of an "ASEAN Chips Act" could become useful—not necessarily as a literal replication of other jurisdictions’ legislation, but as a shorthand for a deeper regional industrial strategy built around AFISS. The objective should be simple:


Make ASEAN function more like one semiconductor ecosystem than ten separate investment destinations.


That would allow the region to compete not by trying to dominate every stage of chip production, but by making its different capabilities work together. AFISS focuses on supply-chain integration, technology and infrastructure, talent development, investment attraction, and cooperation among ASEAN member states ASEAN Framework for Integrated Semiconductor Supply Chain, 2025.


Part II: From Regional Framework to Global Semiconductor Power


Part II will examine how an integrated ASEAN semiconductor strategy could disrupt rigid global supply chains, the barriers that could prevent it from succeeding, and what ASEAN should do next to build a genuinely competitive regional chip ecosystem.


Frequently Asked Questions


Why is ASEAN important to the global semiconductor supply chain?


ASEAN already plays an important role in semiconductor manufacturing, assembly, testing, packaging and supporting industries. Countries including Malaysia, Singapore, Viet Nam, Thailand and the Philippines have developed complementary capabilities, giving the region the potential to become a more diversified semiconductor production base.


What is the ASEAN Framework for Integrated Semiconductor Supply Chain?


The ASEAN Framework for Integrated Semiconductor Supply Chain (AFISS) is a regional framework designed to strengthen ASEAN’s semiconductor ecosystem, improve supply-chain resilience, attract investment and increase the region’s participation in global semiconductor value chains.


What caused the global semiconductor supply-chain crisis?


The semiconductor supply chain has been affected by a combination of highly concentrated production, the COVID-19 pandemic, geopolitical tensions, trade restrictions, natural disasters and transportation disruptions. These events demonstrated how a disruption in one part of the supply chain can affect manufacturers and consumers worldwide.


Why does semiconductor supply-chain diversification matter?


Semiconductor production is highly interconnected, and disruptions can affect industries ranging from automobiles and consumer electronics to healthcare and defence. Diversifying production across multiple locations can create additional sourcing options and reduce the risks associated with relying heavily on individual facilities or regions.


Does ASEAN have the capacity to become a major semiconductor hub?


ASEAN already has many of the necessary foundations, including established electronics and semiconductor manufacturing, skilled workers, industrial parks, ports, logistics networks and significant foreign investment. The challenge is connecting these capabilities more effectively across the region and moving into higher-value activities.


Is ASEAN trying to replace Taiwan and South Korea?


No. ASEAN's opportunity is better understood as diversification rather than replacement. Taiwan and South Korea remain major semiconductor powers, while ASEAN can provide additional manufacturing capacity, supply-chain options and geographic diversification for global companies.


What is the biggest challenge for ASEAN’s semiconductor ambitions?


The biggest challenge is moving from separate national semiconductor industries toward a genuinely integrated regional ecosystem. This requires investment, skilled workers, infrastructure, regulatory coordination and stronger connections between the different stages of semiconductor production.

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