Southeast Asia has long served as a critical node in the global semiconductor supply chain, and today it is presented with a once-in-a-generation opportunity to move up the value stack as geopolitical rivalry between major powers redraws where chips are designed, manufactured and ultimately controlled.
Policymakers across the region, particularly in Malaysia, Vietnam and Singapore, are stepping up with bold initiatives aimed at capturing this moment. Yet structural gaps remain across capital formation, upstream capability and long-term ecosystem depth, DealStreetAsia finds in its latest special report—Semiconductors: Southeast Asia’s strategic ascent.
Since the 1970s, Southeast Asia has developed a deep specialisation in outsourced semiconductor assembly and testing (OSAT). While this segment rarely commands the attention given to chip design or front-end manufacturing, it plays a foundational role in determining the performance, reliability and scalability of silicon systems.
The region’s OSAT capacity has positioned it as a key manufacturing hub within the global semiconductor landscape, contributing around 20% of worldwide chip exports valued at approximately $234 billion in 2023, according to the ASEAN Statistics Web Portal.
However, OSAT captures just 5-10% of a chip’s total value. The lion’s share lies further upstream in IP ownership, wafer fabrication and system-level architecture. Without deliberate movement up the stack, Southeast Asia risks remaining trapped in low-margin, high-dependency roles, vulnerable to automation, pricing pressure and capital reallocation as global incentive regimes shift.
Packaging the future
Beyond geopolitics, the rise of electric vehicles and smart mobility technology is creating strong tailwinds for Southeast Asia’s semiconductor ambitions.
Modern EVs are packed with chips that control batteries, motors, safety features and autonomous systems. These include System-on-Chip (SoC) units, GPUs for AI processing, and power-efficient components made from silicon carbide (SiC) and gallium nitride (GaN). As demand for these technologies grows, so does the need for high-performance, energy-efficient chip solutions.
This shift is accelerating the industry’s move towards advanced packaging and chiplet integration. With Moore’s Law slowing, performance gains are now coming from linking multiple chiplets into a single package, improving speed, thermal efficiency and system functionality. These innovations are not only for EVs but also for AI systems, data centres and edge devices.
Southeast Asia is beginning to stake its claim in this critical segment, DealStreetAsia’s report finds.
In Singapore, Silicon Box is a leader in chiplet packaging. Founded by former CEO of STATS ChipPAC and the co-founders of Marvell Technology Group, the company focuses on 2.5D and 3D packaging and has raised over $500 million in funding to date. Its rise reflects not just engineering talent, but the strength of Singapore’s research ecosystem and public–private alignment.
In Malaysia, Intel is investing $7 billion to expand advanced packaging in Penang, including its Foveros 3D stacking technology. This move positions the country as a key site for Intel’s next-generation AI and server chips.
Vietnam is also moving forward. Amkor’s $1.6 billion system-in-package facility near Hanoi came online in late 2023, supporting miniaturised, multifunctional chips for wearables, edge devices and consumer electronics.
These developments signal Southeast Asia’s growing entry into advanced packaging, a segment that is increasingly central to global semiconductor competitiveness.
Policy at work
Across Southeast Asia, governments are sharpening fiscal tools, restructuring incentives and signalling long-horizon commitments in a bid to capture greater upstream value.
Malaysia’s National Semiconductor Strategy (NSS), launched in 2024, outlines a three-stage, three-decade roadmap to move beyond OSAT: build foundational capacity in IC design and advanced packaging; scale into high-value manufacturing and talent pipelines; and eventually anchor front-end fabrication.
To support this vision, Malaysia is mobilising 25 billion ringgit (approx. $5.3 billion) in fiscal support through 2035. This includes tax incentives, infrastructure financing, talent upskilling and direct subsidies. A key pillar is the planned IC Design Park, announced in April 2025, which will be the largest of its kind in Southeast Asia.
Vietnam’s National Semiconductor Strategy (2024–2050) marks the country’s first comprehensive roadmap for the sector. Structured in phases, it targets value creation through IC design, advanced packaging and skilled workforce development, each aimed at reducing reliance on foreign IP and moving beyond contract assembly.
To crowd in private capital and attract global players, Vietnam is deploying a generous incentive regime. Key levers include corporate income tax exemptions for up to four years, followed by preferential rates as low as 10% for up to 15 years; import duty and VAT waivers for high-tech equipment; and long-term land lease incentives in semiconductor-priority zones such as Saigon Hi-Tech Park and Hoa Lac Hi-Tech Park.
Singapore is taking a more horizontal approach. While not framed as a dedicated semiconductor strategy, the sector features prominently in the Research, Innovation and Enterprise Plan 2025 (RIE2025), which allocates S$25 billion (approx. $18.5 billion) to R&D across frontier technologies including semiconductors, AI and quantum.
In Budget 2025, the government earmarked an additional S$3 billion for the National Productivity Fund (NPF) to attract strategic investments. The fund offers targeted cash grants and investment credits, lowering capex barriers for global firms while supporting domestic ecosystem development. In effect, it reduces deployment risk for operators and incentivises deeper, longer-term commitments in high-value activities.
Lingering pains
Despite strong political intent and a growing number of public-private initiatives, Southeast Asia continues to face structural gaps across the deep tech capital stack. From seed to scale, funding pathways remain fragmented and often mismatched with the risk profile and timelines of semiconductor ventures.
Early-stage activity has gained momentum, supported by grants, incubators, and state-backed programmes. However, the number of funds with the mandate and capacity to back capital-intensive ventures remains limited as fund managers are deterred by long time horizons, technical complexity, and uncertain exits. As a result, capital formation at the scale-up stage remains shallow, leaving most semiconductor ventures stranded at validation, the report said.
Separately, it also highlighted the lack of LPs willing to provide patient, risk-tolerant capital, even well-intentioned policy efforts will struggle to translate into commercial outcomes. What is needed is not only more capital, but the right kind of capital, aligned with the realities of deep tech lifecycles and equipped with the conviction to back longer-term bets.
The lack of credible exit routes further constrains momentum. IPO markets remain shallow, and strategic M&A is limited. For semiconductor and hardware-heavy startups, this makes returns hard to realise and investor commitment difficult to sustain.
Beyond capital, the report argues that a deeper vulnerability lies in the region’s lack of domestic capability in EDA tools and semiconductor IP. While Singapore has taken early steps, most of Southeast Asia still relies on foreign-owned toolchains, limiting control over innovation and long-term value capture.
Supply chain gaps compound the challenge. While Southeast Asia leads in backend assembly and packaging, upstream and midstream segments remain underdeveloped. Key inputs such as photomasks, probe cards, and semiconductor-grade materials are still imported. This raises costs, increases exposure to external shocks, and deters global players from fully embedding operations in the region.
Southeast Asia’s semiconductor push is not short on ambition. But without deeper capital, strategic infrastructure, and regional coordination, the region risks remaining a staging ground for innovation, not a destination for scale.
A desirable future
Another piece of the puzzle missing from Southeast Asia is a coordinated roadmap for specialisation and complementarity. Policymakers in semiconductor-producing countries are expanding packaging and assembly in parallel, often without alignment. This raises the risk of duplicative investments, underused assets, and a subsidy-driven race to the bottom.
“As geopolitical shifts lead many countries to prioritise domestic ecosystem development, the risk of duplication without sufficient market demand or talent depth is real,” said Michael Han, the head of business at Silicon Box.
The risk of duplication is especially true in legacy manufacturing, where oversupply is already a concern, he said. Despite strong global demand, he argued that Southeast Asia would be better served by more coordinated regional strategies, with targeted investments and balanced development across infrastructure, talent, and industrial capacity.
Echoing similar concerns, Johan Rozali-Wathooth, Founder, CEO and Executive Director of Bintang Capital Partners, noted that while some degree of overlap is inevitable, ASEAN countries have a real opportunity to pursue complementary specialisations.
“Rather than all countries competing for the same segments, regional alignment around strengths, [namely] Malaysia in packaging and testing, Singapore in R&D, Vietnam in high-volume manufacturing, could lead to more efficient investment and supply chain integration,” said Rozali-Wathooth.
He added that even a soft form of alignment, through mutual recognition of each country’s advantages, could be highly impactful. Malaysia, alongside Singapore, already plays a significant role in the global semiconductor space and is well-positioned to help convene and steer this regional dialogue.
Win-win outcomes can be achieved, provided there is a willingness across the region to collaborate, he said.
The Semiconductors: Southeast Asia’s strategic ascent report discusses:
- The redrawing of the global semiconductor industry amid US-China rivalry.
- Demand for EVs and smart mobility driving advances in semiconductors.
- Generative AI’s transformative role in semiconductor design.
- The major capital gaps in the semiconductor and deep tech lifecycle.
- The national semiconductor strategies of different SE Asian countries.
