ASEAN’s quiet upside in the global tech boom

Today’s artificial intelligence (AI)-driven investment cycle differs from past tech booms, yet still has room to run.

Concentrated capital expenditure (CapEx) by global hyperscalers is reshaping trade flows and hardware demand without clear signs of a bubble.

ASEAN stands to benefit meaningfully through supply chain depth, data centre foreign direct investment (FDI), geopolitical diversification, and mature node resilience, even without home-grown AI giants.
 

What sets this cycle apart and what remains familiar

This cycle is powered by concentrated investments in AI infrastructure.

A handful of hyperscalers and platform giants dominate spending on data centres, compute, networking, storage, and advanced packaging. Global trade flows show a sharper tilt towards servers, networking gear, and storage devices than in prior cycles, reflecting how AI training and inference have reshaped hardware demand.
 

Yet this is not a runaway super-cycle. Export growth, while strong, is broadly in line with previous upswings. At the firm level, CapExratios normalised for free cash flow are far below 1990s peaks, and leverage remains modest.

There is little sign of a bubble in AI-related CapEx, even if equity market corrections cannot be ruled out. Absent a systemic shock, the business cycle has room to run for another 12 to 18 months.
 

Why ASEAN benefits – even without national AI champions

A rising tide lifts all boats that are seaworthy. ASEAN’s boats are not the largest in AI, but they are well-positioned and increasingly specialised. Five channels stand out.

• Supplier depth and adjacency: Global tech leaders rely on a long tail of suppliers in wafers, front-end equipment and tools (WFE), memory, compute, power components, cooling solutions, racks, and advanced packaging and testing.
  Many of these niches sit in Southeast Asia. Indirect exposure is deeper than headlines suggest: precision engineering for fabs, outsourced semiconductor assembly and test services, radio-frequency components for network gear, and optical interconnects all scale with AI compute.
  
• The accelerator effect: Investment is procyclical. Firms pull orders forward when a new product cycle looms. The chips powering AI servers are set for explosive growth, driving demand for wafer capacity in memory and logic.
  That means more tools, more complex packaging, longer test times, and requirements for higher throughput. All these benefits are expected to ripple across ASEAN supply chains.
  
• Data centre FDI: ASEAN’s appeal is practical: competitive power tariffs, land availability, dense connectivity, and supportive permitting. Data centres also need conventional servers, network upgrades, energy-efficiency retrofits, and liquid cooling, spreading the tailwind beyond pure-AI hardware.
  
• Geopolitical diversification: Major economies are deploying fiscal incentives to localise semiconductor manufacturing, benefiting upstream WFE producers operating in Southeast Asia.
  Many global firms are diversifying supplier bases partly to foster price competition, creating openings for ASEAN suppliers. The region’s mature semiconductor and electronics ecosystem, developed since the 1970s, gives ASEAN a distinctive niche in attracting FDI despite heightened competition.
  
• Mature-node resilience: Foundries in Southeast Asia mostly run legacy nodes, but capacity is expanding. Singapore and Malaysia are adding mature-node capacity and holding their ground against China’s aggressive build-out.
  

Country lenses: Vietnam, Malaysia, Singapore, and Thailand

At the country level, the epicentre of tech exports has shifted. Asia ex-China now accounts for about 60 per cent of global technology goods export growth, up from 28 per cent over the past two decades, driven by Taiwan’s rising share and broader supply chain diversification.

China’s exports of PCs and mobile phones remain in contraction, signalling some erosion in selected end-product market share as tariffs and assembly shifts favour other economies, though strong export performance and growth in new economy sectors have kept its GDP expanding around 5 per cent.

For ASEAN, technology-related exports have more than offset tariff headwinds this year.

Vietnam continues to gain share as earlier FDI in electronics assembly and components matures. Malaysia’s semiconductor ecosystem, including OSAT (outsourced semiconductor assembly and test) and precision tooling, benefits from rising complexity in packaging and testing.

Singapore anchors high-value activities, notably specialised equipment and regional data-centre operations. In Thailand, growing demand for cooling systems, power equipment, and construction services tied to new data centres is creating opportunities for domestic firms.
 

From CapEx to profits to CapEx – and cycle extension

Like business cycles, tech cycles feed on reinforcing feedback loops between demand, investment, and expectations.

Upswings start when new product waves or shifts in anticipated demand pull forward capital spending. Narrative-driven optimism and high fixed costs amplify the surge. Adoption and diffusion then tend to extend the momentum.

Memory shortages, rising WFE spend, and the push for more advanced packaging are consistent with a broadening upswing. AI CapEx is not the only driver; traditional product lines persist and, in some cases, refresh through replacement cycles and efficiency upgrades.

Meanwhile, emerging product narratives such as humanoid robots or autonomous driving systems could seed a new hardware wave.

The lag between technological adoption and measured productivity gains is well known. The Solow Paradox, seeing computers everywhere except in productivity statistics, captures the early stage of the J-curve, where investment and disruption precede payoff.

AI is likely following the same pattern.

As productivity diffuses, non-tech industries invest in AI-enabled processes, reinforcing the accelerator principle.

Risks and the “winner-takes-more” concern

ASEAN’s upside is quieter but cumulative: adjacency, specialisation, and FDI gravity. If an asset-price bust is avoided, profitable leaders will keep investing, suppliers will scale, and the cycle can extend over the next year or two.

Not all boats will rise equally, but the region’s seaworthy vessels are moving with the tide.

The region’s challenge is to deepen capabilities, build human capital, and improve grid resilience and power pricing to sustain data-centre growth.

Macro stability is necessary, but not sufficient. Industrial strategy, governance and regulatory capacity, and tight integration into global production networks matter more than headline ambitions to mint national champions.
 

The writer, Grace Lim, is a senior ASEAN and Asia economist at UBS Investment Bank Global Research.

This article was first published in The Business Times ©️ SPH Media Limited on 2 January 2026, and is reproduced with the writer’s permission.