Organisation:
Boston Consulting Group
Resource Link:
Published in 2021, Link
My Key Takeaways
A perfect storm of megatrends is prompting companies to rethink where and how they make and source their goods.
ASEAN’s manufacturing ecosystem has and continues to benefit from these global shifts.
You’ll find below some of my takeaways from Boston Consulting Group (BCG)’s latest report on supply chain and manufacturing opportunities for ASEAN.
Impressive CAGR across a number of sectors in ASEAN from 2015-2019, notably high-tech sectors like automotive, electronics, machinery (6%). [Exhibit 1]
Supply Chain Shifts
- China Plus One strategy – US-China trade tensions fanned increased interest in alternative production sites.
- COVID-19 also intensified supply chain diversification away from single sources and to produce closer to market. 87% of SC professionals plan to make investments that will improve resiliency (2021 Gartner)
- Global scrunity on sustainability (e.g EU’s carbon border) – pressure on Asian manufacturers to reduce carbon footprint to maintain access to global markets.
- Regional Comprehensive Economic Partnership (RCEP) – RCEP countries like ASEAN, Australia, China, Japan, New Zealand and South Korea have a combined population of 2.2B (~30% of global GDP), making RCEP the largest trade pact in the world. RCEP lowers costs of importing manufacturing inputs (duty-free access to goods representing 92% of tariff lines).
Ideas for EU/UK manufacturing companies to consider for their ASEAN growth strategy:
After China, EU is slated for the 2nd largest increase of US$28B in trade with ASEAN from 2019 – 2023 [Exhibit 2].
EU companies should look forward to benefit significantly from ASEAN’s recovery from COVID-19.
All the following sectors are highly susceptible to supply chain shifts (more than 10 out of BCG’s scale of 20) [Exhibit 3]:
Opportunities for EU companies to pioneer the following NEW sectors in ASEAN (the region’s share is less than 8% of global exports today):
– Medtech (15/20 likelihood of supply chain shift, 7.5% (ASEAN’s share of global exports for sector))
– Electronic equipment (12.5/20, 7%)
– Biopharmaceuticals (13/20, 3%)
– Mechanical machinery (11/20, 7%)
– Chemicals (11/20, 7.5%)
– Automotive & Mobility (10.5/20, 4%)
Opportunities to innovate in ASEAN’s sectors of STRENGTH (ASEAN’s share is more than 10% of global exports):
– Semiconductors and materials (13/20, 23%)
– Consumer electronics (11/20, 18%)
– Packaged foods (10.5/20, 9%)
– Aerospace (12/20, 8%)
Twinning model case studies – distribute your supply chain & advanced manufacturing needs across Singapore and ASEAN, while optimising costs:
- Yokogawa (precision instruments) – Batam (subassemblies, components) / Singapore (innovation centre, logistics, final assembly, testing)
- Infineon (semiconductor) – Batam (assembly, packaging) / Singapore (R&D, i4.0, testing)
- Hyundai Motor – Indonesia (lithium-ion battery plant collaboration with LG Chemical) / Singapore ($400M Mobility Innovation Centre (IIOT, AI))
Batam (Indonesia) & Singapore are a 45-minute ferry ride apart.
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If European and UK manufacturers act decisively and challenge old production paradigms, they are well-positioned to capitalise on these shifts!
My LinkedIn post here.
About Zhilin SIM
Having worked and lived in Singapore, the Nordics, China, Spain, UK, I’m now based in Paris.
I’m fluent in English, French and Mandarin, and I’m learning Arabic because it’s a beautiful and fascinating language.
My team creates and supports one-many initiatives connecting Corporate and Startup ecosystems in Europe to business and innovation opportunities in Singapore and Southeast Asia.
I’m passionate about horticulture, watercolour, startups/tech as well as French cuisine, Peranakan kueh techniques and other global cuisines.
Feel free to connect with me if you think my network in Europe and Asia could be of benefit to your business and innovation activities.
