Semiconductor ecosystem in Southeast Asia
Semiconductor Geography - Project update
Southeast Asia is a region where the semiconductor industries of the United States and China could meet, compete, or converge. Tech war between two technology giants undermines globalization in the sector and segmentation is increasing with a tit-a-tat of trade restrictions. In this trend, Southeast Asian countries struggle to keep their industrial stability and support economic development. Unlike most countries labeled pro-American or pro-Chinese terms, the region manages to cope with the interests of Washington and Beijing simultaneously. It allows Southeast Asia to benefit from a trade-off while providing political and military stability.
The strategic location of Southeast Asian countries close to China, India, Japan, South Korea, and Taiwan Island makes the region a key destination for the semiconductor industry. Each Southeast Asian country could claim to become a hub of microelectronics, a significant technology in the world. Current shadows over Taiwan due to the tensions with China have spiked competition among the region's countries to receive more industrial capacities in their territories. As all of them can take advantage of their strategic locations, other factors such as business environment, infrastructure, and well-trained labor play critical roles in this contest. In this manner, every country in the region has advantages and disadvantages.
Southeast Asia is home to more than 60 universities teaching electrical engineering, material science, and technology and engineering fields. The Malay Peninsula is a cluster of the highest-ranked universities, and the territory is located between Java Island and Bangkok, the next higher education centers in the region. In addition, its proximity to the Malacca Strait enables it to navigate industrial products around the globe conveniently. Nine universities in the peninsula train specialists in both electrical engineering and material science which are the two most significant fields for the semiconductor industry and they are located in Malaysia, Singapore and Thailand.
Approximately 120,000 students graduate in engineering annually in Southeast Asia. Malaysia, the Philippines, and Singapore educate one engineer for around 2000 people while the statistics are between about 5000 and around 7000 for Indonesia, Myanmar, and Laos. Vietnam is the leader in training engineers per person with about a 1/1000 rate while Cambodia shows the lowest numbers with around 1/17000. This indicator is significant as it presents labor availability for the semiconductor industry.
Furthermore, there is a wide disparity among countries in their innovation capacities. According to the Global Innovation Index, Singapore is one of the leaders, ranking fourth in the list, while Brunei, Laos, Cambodia, and Myanmar are in lower positions. Malaysia, Thailand, Vietnam, the Philippines, and Indonesia are placed in the middle of the index.
Another factor that the countries in Southeast Asia should address is the gap between innovation input and output. Singapore, Malaysia, and Indonesia experience systematic loss of input, which is necessary to resolve to increase productivity in the technology sector. In this manner, the biggest burden comes to Brunei positioned at 55th in input and 123th in output. Two separate researches on the innovation barriers in Malaysia and Indonesia show the high cost of innovation, lack of internal and external funding, uncertain demands, and differences among regions' development as key factors contributing to the innovation gap. To wrap up, the contradictory information about supportive government input in the Global Innovation Index and the lack of funding in research papers leads to the possible conclusions:
business and communities have no adequate information about government input in the innovation sector
there is fear of taking a risk
the government services for innovative units and people are less accessible
lack of trust exists between technology researchers and business owners
It signals that governments should incentivize structural and systematic reforms to increase the profitability of their inputs. First, the business-to-government talks and open platforms pave the ground for national technology firms to benefit more from state support initiatives. Secondly, inter-regional migration in Malaysia and Indonesia provides knowledge flow along the territorial units of these countries. Thirdly, the free movement of engineers among regional countries may fill the innovation gaps. For instance, Vietnam, Thailand, and the Philippines take more output than their inputs while Singapore and Malaysia are Southeast Asian leaders according to overall parameters. Finally, states could stimulate medium and small companies to organize consortiums to mitigate the problem related to the lack of internal and external funding. Structural and systemic reforms serve to improve innovation ecosystems including the semiconductor industrial ecosystem in the region.
Shakhboz Juraev is the Chief Coordinator of Technology in Global Affairs. He is the author of the book "Hybrid Strategy of Cybersecurity: The Role of Information Technology Companies in Chinese Cybersecurity Policy”.