Only the agile will win across ASEAN’s evolving markets

The first move was about leaving China. The second is about designing for the region, not just an individual market. 

For a long time, much of the world was stamped “Made in China.” Dubbed the world’s factory, China sat at the centre of global manufacturing, fostering an overreliance that was never built to last.

Over the past couple of decades, however, China’s role has evolved, from a hub of mass production into a “factory of factories,” exporting intermediate components for final assembly elsewhere. This shift has been accompanied by a move up the value chain, increasing demand for skilled labour and, in turn, driving up labour costs.

As China’s manufacturing base has evolved, ASEAN economies have steadily absorbed manufacturing capacity relocating out of China.

This absorption has only trended upward. Vietnam, for example, recorded a 9.8% year-on-year increase to US$7.40b ($9.1b) in the first four months of 2026, the highest combined January–April figure in five years. Of this, US$6.12b ($7.9b) flowed into processing and manufacturing, accounting for the vast majority of inflows, highlighting ASEAN’s growing role as the primary destination for China’s outbound manufacturing.

Recent shocks have accelerated this pivot toward ASEAN, driven by a global push to diversify supply chains amidst rising trade tariffs and broader geopolitical tensions. Together, these forces point to the region stepping more decisively into its role as a global manufacturing hub.

But with that role comes new expectations. Pressure is mounting on the region to demonstrate genuine value-add, not simply act as a conduit for Chinese re-export. In response, rapid industrial maturation is already underway: Malaysia is advancing in semiconductors, Indonesia in electric vehicle (EV) batteries, and Vietnam in electronics assembly.

For businesses entering the region, the rise of multiple manufacturing hubs unlocks new avenues for growth, but, at the same time, reshapes the regional landscape year by year. Malaysia, for instance, just overtook Vietnam for second place in the Asia Manufacturing Index 2026.

Greater competition brings deeper diversification, which in turn, spells far more fragmentation. To fully capture the opportunities in ASEAN, companies must operate with far greater agility across a regional landscape that is becoming more dynamic and complex each year.

For example, manufacturers looking to operate across Vietnam, Indonesia, and Malaysia must navigate differing tax regimes, e‑invoicing systems, labour laws, and compliance requirements. Despite ASEAN’s integrated trade frameworks, the region’s regulatory environment remains far less harmonised. Even traditionally stable markets are changing: Vietnam’s amended 2025 Corporate Income Tax law has reshaped manufacturing incentives, whilst regional agreements such as ATIGA 2.0 and RCEP add further complexity when applied across multiple sites.

ASEAN’s potential is significant, but the region is still in an early stage of development. Often likened to China 15 years ago, ASEAN is at an inflection point: Momentum is building, and the opportunity is compelling. Manufacturing FDI into ASEAN surged 147% in 2024 to US$44b ($57b) yet scale alone will not determine the long‑term winners.

The strategic imperative is no longer simply about moving production out of China, it is about building a diversified, resilient presence across multiple ASEAN markets, capable of withstanding constant change.

The second wave of investment into ASEAN will require companies to take the region seriously, designing for its complexities, where production hierarchies are constantly being reshuffled and a manufacturing footprint optimised for 2024 can look markedly different by 2026.

The operating environment remains in flux. Success will depend on strategies that move beyond a single‑market mindset and embed a regional layer from the outset.

This approach demands strong central coordination. In a multi‑jurisdictional operating environment, effective decision‑making must be anchored in a central hub, supported by a hub‑and‑spoke model that ensures consistency whilst enabling local execution.

Within this structure, compliance should be treated as a source of competitive advantage, not merely a box to be checked, but a capability that drives speed, resilience, and credibility in the market.

The market is already moving in this direction. Singapore‑led FDI into Vietnam reached US$5.32b ($6.52b) in the first quarter (Q1) 2026, accounting for 52% of newly registered capital. This reflects a broader trend in which foreign capital flowing into Southeast Asia is increasingly routed through Singapore‑incorporated holding companies before being deployed into operating assets across Vietnam, Indonesia, Thailand, and beyond.

It is no surprise that Singapore has emerged as a top choice for this role. Its geographic proximity makes communication with regional markets quick and easy. Combined with a pro‑business culture, strong infrastructure, superior logistics connectivity, advanced technological capabilities, and a deep talent pool, the conditions come together to create an ideal regional base.

From hubs like Singapore, alongside others in Asia‑Pacific such as Hong Kong and Tokyo, which are increasingly influential on the global stage, manufacturers aiming to lead their sectors must move beyond managing fragmentation at the country level.

Instead, they must consolidate tax, treasury, IP, and compliance complexity through regional holding platforms that provide scale, control, and strategic coherence.

The first move was about leaving China. The second move is about building something that lasts by designing for the region, not just an individual market within it.