Tech giants are starting to treat South-east Asia like the next big thing
Indonesian President-elect Prabowo Subianto (left) meeting with Apple CEO Tim Cook in Jakarta on April 17. (Photo credit: AFP)
Source: The Straits Times
Long considered a tech hinterland, South-east Asia is fast emerging as a centre of gravity for the industry.
The chief executives of Apple, Microsoft and Nvidia are among the industry chieftains who have swung through the region in past months, committing billions of dollars in investment and holding forth with heads of state from Indonesia to Malaysia. Amazon.com just last week took over a giant conference hall in downtown Singapore to unfurl a US$9 billion (S$12 billion) investment plan.
After decades of playing second fiddle to China and Japan, the region is drawing more tech investment than ever. For data centres alone, the world’s biggest companies are set to splurge up to US$60 billion over the next few years.
Traditionally welcoming to Western investment, the region’s moment has arrived as China turns more hostile to US firms and India remains tougher to navigate politically. Silicon Valley is setting its sights on business-friendly regimes, fast-growing talent pool and rising incomes. The advent of artificial intelligence (AI) is spurring tech leaders to pursue new sources of growth, laying the digital infrastructure of the region’s future.
“Countries like Singapore and Malaysia are largely neutral to the geopolitical tensions happening with China, US, Ukraine and Russia,” said Mr Sean Lim, a managing partner at Singapore-based NWD Holdings, which invests in AI-based projects and other areas. “Especially with the ongoing wars, this region has become more attractive.”
Take Apple’s Tim Cook and Microsoft’s Satya Nadella, who in April embarked on their biggest tours across South-east Asia in years. The investments they pledged are set to help turn the region into a major battleground between the likes of Amazon, Microsoft and Google in future frontiers such as AI and the cloud.
The region’s growing workforce is making it a viable alternative to China as a centre of talent to support companies’ global operations. As its governments pushed for improvements in education and infrastructure, it has become an attractive base for everything from manufacturing and data centre to research and design.
South-east Asia has also become a sizeable market for gadgets and online services. About 65 per cent of South-east Asia will be middle class by 2030, with rising purchasing power, according to Singapore government estimates. That will help more than double the region’s market for internet-based services to US$600 billion, according to estimates by Google, Temasek Holdings and Bain & Company.
Apple, whose pricey gadgets for long remained out of reach for the vast majority in the region, is now adding stores. Its CEO, Mr Cook, toured Vietnam, Indonesia and Singapore in late April, meeting prime ministers and announcing fresh investments as the company seeks new growth regions beyond China, where sales have sputtered.
In Jakarta, besides powwows with the country’s leadership, Mr Cook met a local influencer with almost 800,000 Instagram followers over chicken satay, and learnt enough of the local language to say “How are you” in a video circulated on social media. On his X account, local customers asked Mr Cook for an Apple Store and better servicing of Apple products in the country. Following the trip, Apple reported its revenue in Indonesia had reached a record, even as total global sales declined.
“These are markets where our market share is low,” Mr Cook said on a conference call last week. “The populations are large and growing. And our products are really making a lot of progress.”
Mr Nadella also received an enthusiastic welcome after meeting with the leaders of Malaysia, Indonesia and Thailand last week.
South-east Asia’s draw becomes apparent once you consider slowing toplines in Silicon Valley, which is struggling now to lay the foundations of AI – anticipated to become an industry-defining technology. Within the next few weeks, two major AI-themed events in Singapore are set to feature top leaders from OpenAI, Anthropic, Microsoft and others to further tout the technology’s promise for Southeast Asia.
A specific catalyst for the tech companies is generative AI, with services like ChatGPT rapidly gaining users. South-east Asia’s accelerating AI adoption has the potential to add about US$1 trillion to the region’s economy by 2030, according to a report by consulting firm Kearney.
That means more data centres are needed to store and process the massive amounts of information traversing between content creators, companies and customers. Data centre demand in South-east Asia and North Asia is expected to expand about 25 per cent a year through 2028, according to Cushman & Wakefield data. That compares with 14 per cent a year in the US. By 2028, South-east Asia will become the second largest non-US source of data centre revenue in the world.
Hot spots include Malaysia’s southern Johor Bahru region, where Nvidia in 2023 teamed up with a local utility for a plan to build a US$4.3 billion AI data centre park. Nvidia is also targeting Vietnam, which CEO Jensen Huang sees as a potential second home for the company, local media reported during his visit in December.
The company has since reviewed Hanoi, Ho Chi Minh City and Da Nang as potential locations for investments, with Mr Keith Strier, its vice-president of worldwide AI initiatives, touring the cities last month.
A region consisting of about a dozen politically, culturally and geographically disparate countries, South-east Asia isn’t the easiest market for global companies to operate in. Risks include difficulties navigating local working cultures, as well as the volatility of the various currencies, said NWD’s Mr Lim.
But for now, the tech majors are embracing the region’s advantages, such as its relatively low-cost yet highly skilled workforce. Most of the US firms announced training programmes with local governments, with Microsoft promising to train a total of 2.5 million people in AI skills in South-east Asia by 2025.
“This shift is influenced by both external and internal drivers,” said Mr Nicholas Lee, associate director in political consultancy firm Global Counsel’s Singapore office. “Besides the intensifying US-China rivalry and policy divergence across major jurisdictions, subdued revenue growth and rising costs also underline the need for companies to manage expenses prudently.”