Investment from Taiwan is fuelling an EV and AI boom in ASEAN

A region once better known for its natural resources is fast becoming a critical part of the EV and AI revolutions.

One of Taiwan’s most popular exports to ASEAN is bubble milk tea. The island’s signature beverage has become a staple of shopping malls and takeaway stands across ASEAN, with total annual sales estimated at US$3.7b. Chatime, one of Taiwan’s leading brands, has over 450 stores in Indonesia alone.  

But the sugary concoction of tea, milk and tapioca pearls is not Taiwan’s only success story in Southeast Asia. 

Trade between ASEAN and Taiwan reached US$117b in 2023, with ASEAN economies accounting for 17.6% of exports from Taiwan. The trade corridor has taken on new significance since the COVID-19 pandemic, led by the realignment of supply chains in the electronics sector. Exports from Taiwan to Thailand have almost doubled since 2019, while those to Singapore and Malaysia have each swelled by more than 60%. 

As we look ahead, it is clear that Taiwan’s strengths in the technologies that will power AI applications and electric vehicles make it integral to the supply chains of the future.

And the opportunity is reciprocal, with Taiwanese companies strengthen their trade links in ASEAN, while international tech firms increasingly see Taiwan as a compelling investment proposition to bring innovations to scale.

Deep links
Taiwan is well known as a global leader in electronics and semiconductors, with more than 70% of the market for high-end chips. Companies from Taiwan make more than 80% of the world’s PCs and 90% of its servers. 

ASEAN has long played a part in these supply chains. In recent years, however, leading companies from Taiwan have been expanding their manufacturing presence in ASEAN, drawn by the quality of the region’s workforce, the increased sophistication of its advanced manufacturing sector and its growing prominence in global supply chains.

That investment reflects the region’s attractions – and reinforces them. As ASEAN’s manufacturing prowess becomes increasingly visible, investors from Taiwan and elsewhere are locating increasingly complex production facilities in the region. 

Vietnam, which has become the second-biggest recipient of overseas investment from Taiwan, provides a powerful example. The Binh Duong branch of the Council of Taiwanese Chambers of Commerce in Vietnam has more than 600 members, the most of any chamber of commerce for companies from Taiwan anywhere in the world. In the opposite direction, more than 250,000 Vietnamese live and work in Taiwan. 

Recently, companies from Taiwan have been stepping up their investments in more advanced electronics. Investments like these help Vietnam upskill its workforce, rise up the manufacturing value chain and attract other suppliers. Other countries in ASEAN can also benefit from the creation of advanced technology hubs and manufacturing clusters that allow multinational companies to reduce risks and consolidate their supply chains. 

Drive to succeed
Investments from Taiwan can also help ASEAN seize new opportunities in the electric vehicle value chain. As well as supplying components to global manufacturers, ASEAN boasts a significant EV opportunity in its own right: annual sales in the six biggest ASEAN economies are estimated to reach US$100b by 2035.

Backed by its longstanding strength in research and development, Taiwan has developed an impressive footprint in EV components, ranging from motors and gear sets to touch screens and battery control systems. 

With more global vehicle manufacturers ramping up their production in ASEAN, and homegrown brands moving up a gear, investments from Taiwan are helping to create advanced manufacturing hubs for the EV sector. 

ASEAN’s enduring appeal
PwC forecasts a US$15.7t potential boost to the global economy by 2030 from AI as it transforms productivity. And while EV prices are going through a cyclical downturn, the sector is still expected to benefit from a structural shift in demand: Bloomberg NEF forecasts that EVs will account for 75% of passenger vehicle sales by 2040.

The scale of the opportunity in AI and EVs means that firms from Taiwan in these sectors will be seeking partners and acquisitions across ASEAN, providing a new wave of capital and partners for regional businesses. 

That aligns with a broader trend towards growing international investment in ASEAN. In a 2023 HSBC survey, 54% of international businesses said they had M&A ambitions in the region, citing its skilled workforce, growing digital economy and competitive wages as the top three attractions. This is further reinforced by language capabilities and a cultural affinity with the wider region which attracts many Taiwanese firms.

International businesses that move quickly to align their ASEAN expansion strategies with the growth of advanced manufacturing clusters should also capture their benefits.

The most complex manufacturing operations – such as those producing the most advanced semiconductors – are likely to remain in Taiwan for the foreseeable future, given the degree of specialisation, intellectual property, and capital expenditure required. But we can expect a growing cross-section of advanced manufacturing to migrate to ASEAN over the coming decades as demand ratchets higher and regional supply chains become more and more advanced.

A region once better known for its natural resources is fast becoming a critical part of the EV and AI revolutions – thanks to investment from a place beloved in ASEAN for its bubble tea.