The Southeast Asian (SEA) region is becoming a prime hub for manufacturing, driven by the "China Plus One" strategy, where companies diversify production beyond China. ABI Research forecasts digital spending in SEA, covering Industry 4.0 technologies like robotics, automation, digitalisation, data analytics, connectivity, and worker enablement, to surge from US$75 billion in 2023 to over US$300 billion by 2028, growing at a 32% CAGR. This presents substantial growth prospects for smart manufacturing solutions in SEA.
Matthias Foo, senior analyst at ABI Research, noted that investment by Western players is attracting Chinese automotive manufacturers, such as Hozon New Energy Automobile, GAC Aion, and BYD, to do the same – expanding their manufacturing capabilities in the SEA region.
In addition to the influx of sizeable global manufacturing entities into the region, the region is also witnessing the increasing adoption of digital technologies by large domestic players across various industry verticals, including but not limited to Siam Cement Group, Republic Cement, KCE Electronics, Vinamilk, Hoa Phat Group, SteelAsia, PTT Global Chemical, and Smart Asia Chemical Bhd.
Some of the commonly implemented solutions include the use of manufacturing process software, such as product lifecycle management (PLM) and manufacturing execution systems (MES), and hardware solutions, such as robots, automated guided vehicles (AGVs), and Internet-of-Things (IoT) sensors.
Manufacturing transformation comes with challenges
ABI Research says supporting the digital transformation of manufacturing activities within the region comes with challenges. Some SEA countries may lack the necessary talent or energy infrastructure to support the rapidly increasing number of manufacturers and the implementation of advanced digital solutions.
Additionally, with wages being traditionally lower in this region than in more developed regions, manufacturers will likely feel more disincentivised to implement digital solutions, which may require high upfront capital expenditure (CAPEX).
Jake Saunders, vice president of Asia Pacific and research director for ABI Research’s Southeast Asia Digital Transformation research service, says manufacturers in SEA, especially domestic firms, are not expected to transform their operations overnight completely digitally.
“For firms that are just beginning on their digital journey, ensuring that the right data collection and storage strategies are put in place will be a critical starting point for many enterprises,” he concluded.
