Southeast Asia: The Rising Star of the Tech Industry Amidst US-China Tensions and Political Uncertainty

The article highlights the emergence of Southeast Asia as a key center of gravity for the tech industry, previously considered a tech hinterland. Traditionally welcoming to Western investment, the region’s moment has arrived as China grows increasingly hostile to US firms and India becomes more challenging to navigate politically. The region’s growing workforce is becoming a viable alternative to China as a hub for talent to support global operations due to improving education and infrastructure. Tech giants such as Apple, Microsoft, and Amazon are investing heavily in the region, with Apple CEO Tim Cook visiting Vietnam, Indonesia, and Singapore, and Microsoft CEO Satya Nadella meeting with leaders in Malaysia, Indonesia, and Thailand. The CEOs of these companies have committed significant sums towards turning Southeast Asia into a major battleground for future technologies such as artificial intelligence (AI) and the cloud. The region’s accelerating AI adoption has the potential to significantly boost its economy, with generative AI-related services like ChatGPT gaining popularity. To meet the demand for data storage and processing, data centers are being built at an increasing rate, with Malaysia’s southern Johor Bahru region and Vietnam being targeted by major tech players such as Nvidia and Microsoft. The region’s relative cost and skilled workforce make it an attractive location for building expensive technologies such as large language models. However, operating in Southeast Asia’s disparate and volatile political and cultural landscape presents challenges, including difficulties navigating local working cultures and currency volatility. Despite these risks, tech companies are embracing the region’s advantages, such as its highly skilled workforce, and are engaging in training programs with local governments to mitigate costs. The article concludes with insights from Nicholas Lee, associate director in Global Counsel’s Singapore office, highlighting both external and internal drivers behind the shift towards Southeast Asia, including the intensifying US-China rivalry, policy divergence across major jurisdictions, subdued revenue growth, and rising costs.