[Asia Report] ASEAN: "Semiconductors and AI Are Matters of National Sovereignty"

In just one year, Jensen Huang, CEO of NVIDIA, has revisited three ASEAN countries (Thailand, Vietnam, Malaysia). Notably, Thailand, which was absent last year, was included this time. NVIDIA, a leader in graphics processing units (GPU) and artificial intelligence (AI) technology, is well known for seeking supply chain diversification amid US-China tensions. Particularly, his grand vision notably includes the ASEAN (Association of Southeast Asian Nations) region, drawing attention.

On December 3rd in Thailand, Jensen Huang met with Prime Minister Prayut Chan-o-cha and attended the Thailand AI Vision event hosted by SIAM.AI, NVIDIA’s first cloud partner. This event vividly expressed Thailand’s ambition to promote economic growth using ‘sovereign AI.’ Jensen Huang emphasized that Thailand’s data belongs to its own citizens, supporting a localized AI approach powered by NVIDIA’s cutting-edge DGX H200 system. In other words, without an independent AI infrastructure, it is difficult for a country to secure its sovereignty.

◆ The Issue of Sovereignty ? Amid the discord of US-China trade conflicts, Southeast Asia is quietly emerging as an important player in the global semiconductor industry. The rise of the ASEAN region, which seemed unrelated to the capital-intensive and advanced technology semiconductor sector, is intriguing. The key concept here is ‘Sovereignty,’ which can be smoothly translated into Korean as ‘self-reliance’ or the ‘K-model’ unique to Korea. It is widely known that ASEAN countries, having experienced long periods of colonization, have a particular interest in the issue of sovereignty. Naturally, they are staking their lives on ‘sovereign AI.’ There is an urgent need to secure sufficient semiconductors and data centers for their own AI.

Furthermore, Jensen Huang’s consecutive visits to ASEAN countries, including India, signify the growing importance of ASEAN nations in the semiconductor and AI supply chains. However, whether the ASEAN region can overcome various challenges and seize the final opportunity in the semiconductor industry remains uncertain. The semiconductor industry is rapidly transforming into a security commodity. Governments worldwide are busy securing semiconductor and AI supply chains. The US is imposing comprehensive restrictions on China’s access to advanced chip technology, pressuring companies to diversify their manufacturing bases. Taiwan, long the center of chip manufacturing, is diversifying its supply chain strategy in anticipation of potential conflicts with China.

In this context, ASEAN has emerged as an alternative. Strategically located between China and India, ASEAN countries offer logistical advantages and, with steadily growing consumer markets, are ideal for investment in advanced industries. ASEAN, which has long maintained an open stance toward foreign direct investment (FDI), has rapidly emerged as a new partner in the semiconductor ecosystem.

On the 3rd, Jensen Huang, CEO of NVIDIA, met with Prime Minister Pattontan (right) in Thailand to discuss cooperation on Thailand's AI vision.

◆ Changing Geopolitical Landscape ? First and foremost, NVIDIA’s top courting target is Vietnam. As the US and related companies strive to decouple from Chinese supply chains, ASEAN, especially Vietnam, benefits from waves of investment. Recent data shows that foreign direct investment in ASEAN’s electronics, AI, and semiconductor sectors has surged over the past three years, driven by companies seeking to mitigate geopolitical risks.

On December 10th, during his visit to Hanoi, Jensen Huang announced plans to establish an AI research and development (R&D) center. This center will position Vietnam as a crucial node in NVIDIA’s global strategy. Partnerships will be formed with companies such as Viettel and FPT; Viettel, a military-owned telecommunications company, is focusing on AI research, while FPT has received 127 units of NVIDIA’s HGX H100 servers to localize AI applications. The growth of Vietnam’s semiconductor industry, once considered a novice in electronics, is also rapid. As of February 2023, the value of semiconductors imported from Vietnam to the US was approximately $560 million, a roughly 75% increase from about $320 million in February 2022.

However, despite high government interest and investment, the consensus is that ASEAN’s leap to a semiconductor powerhouse is not easy. Above all, the relatively weak engineering and R&D base is problematic. Semiconductor manufacturing and AI development require highly skilled labor, advanced infrastructure, and a strong ecosystem of suppliers and partners. Except for Malaysia and Singapore, engineering technology is generally weak.

Lee Ji-han, director of the Korea Semiconductor Industry Association, says, “The level of engineering education in ASEAN countries is difficult to meet the expectations of foreign investors.” Vietnamese technology analyst Dr. Hoang Minh states, “ASEAN, including Vietnam, has ambitions to build semiconductor fabs, but foundational infrastructure must come first.” Without prior investment in education, technical training, and infrastructure, it is impossible to move beyond the middle-income country level. A more fundamental concern lies in the fragmented nature of the ASEAN bloc. The aforementioned ‘sovereign AI’ issue boomerangs back. Unlike China, which operates as a single market, ASEAN’s 10 member countries advance individually with varying levels of economic development, regulatory environments, and industrial policies. Their sizes are similar, making it difficult to rank superiority. Their languages, religions, and economic ecosystems are also completely different.

That does not mean cooperation is impossible. Currently, Singapore has leveraged its reputation as a stable and business-friendly environment to attract major semiconductor and AI companies such as Micron and GlobalFoundries. Resource-rich Indonesia is exploring opportunities in the upstream segment of the semiconductor supply chain, including raw material production like silicon and rare earth elements. Countries like Thailand and the Philippines are also offering tax incentives and simplifying investment procedures.

These strengths must be utilized like warp and weft threads and cooperated upon. Initiatives such as the ASEAN Economic Community (AEC) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can serve as platforms for deeper cooperation in semiconductors and AI. Joint investments in education, R&D, and infrastructure will provide the skills and capabilities necessary for the region to compete on a global scale. Countries capable of resolving ASEAN’s challenges include South Korea, the US, and Taiwan. The background to calls for South Korea to take an active role before Taiwan dominates the ASEAN semiconductor market lies here.

Jung Ho-jae, Secretary-General of the Asia Vision Forum