Southeast Asia emerges as world’s new industrial powerhouse: report
A Roland Berger report highlighted the region’s transformation from workshop to complete industrial ecosystem.
Southeast Asia is rapidly evolving from its traditional role as a manufacturing center into a comprehensive industrial hub, according to a recent analysis by global consultancy Roland Berger.
The shift represents a fundamental realignment of global supply chains, driven by companies seeking greater security and resilience in an increasingly multipolar world.
The transformation comes as businesses worldwide reconsider supply chain strategies that historically prioritised pure efficiency. Countries including Thailand, Vietnam, the Philippines, Indonesia, Malaysia, and Singapore are now positioned at the centre of this industrial migration, attracting substantial investment as manufacturers adopt so-called China-plus-one diversification strategies.
“Firms can’t rely on one global model anymore. The real advantage lies in being able to adapt to the new multi-polar landscape,” said Masashi Onozuka, a Tokyo-based partner at Roland Berger.
Strategic specialisation across the region
The region’s emergence as an industrial center reflects careful specialisation amongst member nations. Indonesia and the Philippines are leveraging their abundant upstream mineral resources, whilst Malaysia and Vietnam have developed capabilities in midstream electronics manufacturing. Thailand, meanwhile, is building substantial capacity for electric vehicle assembly.
This strategic distribution of production capabilities has helped Southeast Asia attract significant capital flows. The region received approximately $226b in foreign direct investment, whilst generating $88b in outward direct investment, much of which stays within Southeast Asia or flows to China.
Natural resources drive battery production
Southeast Asia’s vast natural resource reserves, particularly nickel deposits in Indonesia and the Philippines, position the region as a potential leader in battery cell production. This advantage comes at a critical moment, as the global transition to green energy increases demand for batteries and the materials needed to manufacture them.
The battery sector represents a significant growth opportunity, particularly as electric vehicle adoption accelerates worldwide. Chinese manufacturers like BYD have already established themselves as major players in EV battery production, demonstrating the sector’s potential for Asian manufacturers.
Persistent challenges remain
Despite these advantages, the region faces significant obstacles. Southeast Asian nations developed their industrial systems later than Western counterparts, resulting in commoditised low-end competition and chronic industrial overcapacity. Major economies including Japan, South Korea, and Thailand currently operate with industrial capacity utilisation below the 80% threshold, signaling persistent oversupply.
Infrastructure gaps, talent shortages, and energy constraints also threaten to limit the region’s ability to capitalise fully on the manufacturing shift. The report notes that deeper regional integration has been delayed by fragmented cooperation mechanisms amongst ASEAN members.
Adapting to the new landscape
For multinational corporations seeking to take advantage of Southeast Asia’s industrial rise, success will require building supply chains that balance efficiency with resilience, digitalisation, and sustainability. The Roland Berger analysis recommends that companies diversify manufacturing footprints to reduce single-country exposure and establish multi-sourcing arrangements for critical inputs across multiple regions.
Collaboration across specialized clusters will be essential, allowing firms to leverage the distinct strengths of different Southeast Asian nations. Companies must also prioritize sustainability and renewable energy adoption to remain competitive and meet evolving global environmental standards.
“Southeast Asia, which benefits from trade realignment and cost advantages but still faces gaps in infrastructure, talent and energy, is emerging as a midstream production hub,” the report concludes. “But its success will depend on whether companies localize flexibly, embed resilience early and adapt to ASEAN’s fragmented landscape fast enough to seize the opportunity.”
As global supply chains continue their eastward migration, Southeast Asia stands poised to assume a central role in the new industrial order, provided both governments and corporations can address the region’s persistent structural challenges while building on its considerable natural and strategic advantages.
