Southeast Asia-- the potentional market for electronic industry

2024-06-02

Southeast Asia market developed rapidly, they play an important role in electronics market.

It includes a diverse set of countries with rich histories and cultures, such as Vietnam, Thailand, Indonesia, Philippines, Malaysia, Singapore etc.

In the past five years, China's direct exports of electronic products to the United States have dropped by US$10.1 billion, a decrease of 7% compared with 2018. However, at the same time, China's exports to ASEAN increased by US$63.5 billion, an increase of 86% compared with 2018; ASEAN's exports to the United States increased by US$57.7 billion, an increase of 108% compared with 2018.

Southeast Asia's role as a bridge between China and the United States has become increasingly apparent. According to the Global Value Chain Development Report 2023, among Vietnam's exports to the United States, intermediate products from China increased from 2% in 2019 to 10.4% in 2021.

We introduce some main market in Southeast Asia?

1.Vietnam: mainly for electronic manufacturing.

In the past few years, Vietnam's electronics manufacturing industry has been rapidly developing, especially in the northern regions closer to China, such as Hanoi, Thai Nguyen, and Bac Ninh, forming an industrial cluster around major smartphone brands and OEMs like Samsung, Foxconn, and Luxshare.

In 2022, Vietnam's electronics industry exports surged to US$140.34 billion, marking a solid 6% increase from the previous year and constituting over 30% of the nation's total exports.

Following its accession to the World Trade Organization (WTO) in 2007, Vietnam successfully attracted Japanese and Korean electronics industries, paving the way for the development of a robust industrial ecosystem. Presently, Vietnam stands proudly among the top 15 global exporters of electronic products.

The country's allure lies in its combination of low labor costs, strategic geographical positioning, attractive tax incentives, and favorable free trade agreements, enticing foreign investors to establish manufacturing facilities within its borders. Data from the Vietnam Association of Enterprises with Foreign Investment reveals a notable increase in the proportion of foreign direct investment, climbing from 44% in 2019 to 51.34% in 2022.

Primarily focused on consumer electronics assembly and parts manufacturing, Vietnam continues to enjoy growth in its exports of mobile phones and communication products due to the strategic decisions of leading electronics manufacturers to diversify their global supply chains by setting up production facilities in the country.

With a well-established presence in consumer electronics, Vietnam's mature industrial chain provides a strong foundation for venturing into semiconductor manufacturing. The Vietnamese government's initiatives in the semiconductor sector, including the launch of the first integrated circuit development project in 2009 and the inclusion of the industry in national key product catalogs in 2013, have led to the establishment of companies like Saigon Semiconductor Technology Company (SSTI), bolstering Vietnam's position in the semiconductor landscape.

2.Thailand: mainly for PC and Automotive Industries, Eyeing Electric Vehicle Development Opportunities

Thailand is a significant hub for automotive and consumer electronics in Southeast Asia. Major Japanese automakers such as Toyota, Honda, Nissan, as well as electronic giants like Samsung, Sony, Panasonic, and hard drive companies like Western Digital and Seagate have established key bases in the country.

The automotive and electronics manufacturing industries are pillars of Thailand's economy, with the prominence of hard drive and storage manufacturing increasing. According to UNComtrade statistics, in 2022, electronics and automotive-related products accounted for 16% and 11% of Thailand's total exports, respectively.

In 2022, Thailand produced 1.8835 million vehicles, with 1.0026 million vehicles exported. Japanese automakers such as Toyota, Honda, Isuzu, Mitsubishi, Nissan, Mazda, as well as Chinese companies like SAIC, Great Wall, BYD, and NIO have all made investments in the country.

In terms of electronics manufacturing, Thailand manufactures and exports 60 million units of home appliances annually, serving as a production base for companies like Fujitsu, Sharp, Panasonic, Sony, Samsung, TCL, Midea, Haier, and others. Additionally, as the global production center for Hitachi, Western Digital, Seagate, Thailand is the world's second-largest manufacturing country for hard disk drives and storage units.

In the future, Southeast Asia is poised to become a key base for Chinese automotive and electronic exports. In March 2023, BYD announced the construction of a plant with an annual capacity of 150,000 vehicles in Rayong, Thailand. Locally, companies like DELTA, HANA, KCE, SVI also wield significant influence in the global supply chain.

3.Indonesia: Southeast Asia's Largest Smartphone Market, Focusing on 5G Penetration and Premiumization Opportunities

Indonesia, with a population of 276 million, is one of the largest and most significant smartphone consumer markets in Southeast Asia. According to the International Data Corporation (IDC), in Southeast Asia, including countries such as Thailand, Indonesia, Malaysia, Vietnam, and the Philippines, the total smartphone shipments in 2022 amounted to 96 million units, a 15.4% year-on-year decrease, accounting for 8% of global smartphone shipments. Among them, Indonesia had the largest market size with 35 million units shipped, a 14.3% year-on-year decrease, representing 2.9% of the global market.

As per IDC statistics, in 2022, the smartphone market size in key Southeast Asian countries (Vietnam, Indonesia, Thailand, Malaysia) was $19.48 billion, equivalent to 15% of the Chinese market; the compound annual growth rate (CAGR) of the smartphone market in Southeast Asian countries from 2018 to 2022 was 1.44%, compared to China's 0.15%, indicating faster growth in Southeast Asia. By 2022, Chinese brands collectively held a market share exceeding 70%.

There are 2 major business opportunities in the Southeast Asian market: 1) the increase in 5G penetration will drive up the unit prices of mobile products in Indonesia and other countries 2) the increase in internet users and smartphone connections, which is expected to drive growth in mobile internet revenue in major Southeast Asian countries.

Southeast Asia's consumer electronics industry is playing an increasingly important role in the supply chains between China and the United States. With the development of technologies such as 5G, internet connectivity, and electric vehicles, the Southeast Asian market is poised to embrace new opportunities for growth. Chinese investments in Southeast Asia are contributing to enhancing global competitiveness and are worth paying attention to. At the same time, local enterprises in Southeast Asia are actively expanding their global businesses, injecting new vitality into the regional industrial development.