At the height of the COVID-19 pandemic, disruptions to global supply chains negatively impacted the growth and performance of businesses across several professional industries. To prevent similar difficulties in the future, the need to develop supply chains that are both resilient and sustainable became apparent.
For firms in Asia, a significant portion of re-inventing supply chains will center on diversification, thriving to become more independent and flexible. In 2023 and beyond, parties should expect Asia to be a hotbed for supply chain activity.
What Supply Chain Diversification Means for SEA
Such development related to supply chain diversification aligns with market trends emerging throughout the pandemic. These trends have significantly impacted the development of several relevant industries, like logistics, manufacturing, and automotive.
Due to supply chain instability brought about by factors like geo-political conflicts and strict COVID-19 policies, many players seek to adopt a ‘China Plus One’ or simply a Plus One approach. This business strategy means avoiding investing only in China, instead attempting to diversify their business into other countries to avoid potential delays and bottlenecks.
In the context of relocating supply chains throughout Asia, there is a specific opportunity for Southeast Asian countries to capitalize. As early as mid-2022, countries like Vietnam, Malaysia, and Thailand quickly became feasible options for supply chain players with a Plus One strategy.
Some significant examples of manufacturers shifting to SEA include Intel setting up chip factories in Malaysia and fellow tech giant Apple producing flagship products like its MacBook and Airpods in Vietnam. These examples indicate that global players recognize the potential of the ASEAN region due to factors such as lower labor costs, increased visibility and access to new markets, and diversified investments that provide flexibility.
While supply chain players are set to benefit from moving to SEA, several intriguing business opportunities are also present amid international players' supply chain migration to ASEAN countries.
Exploring Related Opportunities in Supply Chains
In the short-term, the opportunities that supply chain diversification will bring to SEA economies are clear. Namely, the migration of players to the region will help drive regional economic growth as it will provide citizens jobs, help accelerate infrastructure development, and attract more international business.
Moreover, the arrival of new manufacturers to the region will drive the growth of industries like construction and infrastructure, as setting up supply chains will require new factories and related facilities. The entry of international businesses will also help ASEAN stay competitive against other global economies, which will ultimately unlock the region’s potential.
Supply chain diversification will likely have a ripple effect on the long-term development of industries. Specifically, SEA economies are known to have their respective specialties, so the entry of new supply chain players can help leverage growth in these areas.
For instance, Vietnam is known to perform well regionally in the electronics and technology categories, so the development of related supply chains can help solidify and extend the country’s position as a major player on a global level. Meanwhile, future automotive supply chains in Thailand can help the country drive the adoption of electric vehicles– a development that will help Thailand and SEA become powerhouses in automotive.
Overall, supply chain diversification and the increased entry of players to Southeast Asia provide beneficial opportunities for all parties involved, especially due to its rapid growth. Although this is promising, the players driving progress should remain cautious and adopt a holistic approach since economies in Southeast Asia are still in the early stages of development.