With Trump in the ascendent, a renewed Western exodus from relationships with Chinese electronics manufacturers seems likely. Here’s why South East Asia may prove a good alternative for OEMs seeking reliable and strategic EMS outsourcing partners beyond the Asian tiger.
Will Trump 2.0 cause a pivot away from China to ASEAN?
With the new president installed - and talking tough on tariffs, companies are now trying to secure their supply chains and manufacturing relationships away from the influence of a potentially toxic US vs China trade war.
But, even as Trump rattles his sabre and encourages companies to bring their facilities back to the US, it may not be possible for Western companies to completely reshore their existing relationships.
So, it’s worth considering whether other overseas options remain viable.
ASEAN: An electronics manufacturing powerhouse
Over the past decade, Southeast Asia has steadily grown into a global electronics manufacturing powerhouse. Abundant labour, favourable government policies, and a strategic geographical location have made the region an attractive destination for Western companies seeking to outsource electronics manufacturing, optimise costs, access new markets, and maintain quality standards.
Are ASEAN countries the right place to go?
When it comes to politics and trade, Southeast Asian countries have a strong track of record pragmatic deal-making that may spare them and their partners the flack from Trump’s war on China.
In this case, outsourcing to ASEAN may be the best option for EMS companies, particularly given the rich capabilities and skill sets that exist there.
Countries like Vietnam, Malaysia, and Thailand are attractive alternatives due to their competitive labour costs, strategic geographic locations, and improving infrastructure.
Source: Asean Briefing
And, indeed, they proved the perfect place for companies who moved away from China during Trump 1.0:
The first Trump administration saw a notable flight of investment away from China, with multinational corporations relocating production to these Southeast Asian hubs to hedge against U.S.-China trade tensions. A second Trump term could further accelerate this trend, potentially leading to increased FDI in ASEAN as companies seek to diversify their manufacturing bases.
Source: Asean Briefing
ASEAN: Top countries for electronics manufacturing outsourcing
With all these pressures at play, many Western businesses may be actively considering outsourcing their electronics manufacturing to Southeast Asia for the first time.
So, here’s a look at the top destinations, their specialities, and considerations for choosing the right partner.
1. Vietnam
Vietnam has experienced rapid growth in its electronics manufacturing sector over the past few years. A combination of relatively low labour costs, government incentives for foreign direct investment, and improving infrastructure make Vietnam an appealing choice for many electronics companies.
Key advantages:
- Competitive labour costs compared to neighbouring countries
- Significant investment from global tech giants (e.g., Samsung, LG), creating an ecosystem of skilled labour and supporting industries
- Government policies favouring technology transfer and tax breaks for high-tech manufacturers
Potential challenges:
- Infrastructure, while improving, can be uneven between major industrial hubs (like Ho Chi Minh City and Hanoi) and other regions
- The language barrier can pose communication challenges, particularly outside major cities
- High demand for skilled workers sometimes outpaces supply, leading to salary inflation and employee turnover
2. Thailand
Long known for its automotive and industrial manufacturing expertise, Thailand has also become a hub for electronics assembly and printed circuit board (PCB) production. Its established manufacturing ecosystem, strategic location, and growing emphasis on high-tech industries make it a natural choice for many companies.
Key advantages:
- Well-developed infrastructure and logistics networks
- Strong governmental support through initiatives like “Thailand 4.0,” which aims to shift the country’s economy to more technology-driven industries
- Robust supply chain for components, thanks to a well-established industrial base
Potential challenges:
- Labour costs can be higher compared to some neighboring countries
- Regulations may be more complex, and companies must navigate bureaucratic processes carefully
- Although English proficiency is common in business hubs, language can still be a barrier outside urban centres
3. Malaysia
Malaysia boasts a well-educated workforce, especially in electronics, thanks to its long-standing experience in semiconductor and electronics assembly. The country offers political stability and well-developed infrastructure, making it a favourite among companies seeking both quality and reliability. Companies operating in Malaysia are
Key advantages:
- Skilled workforce in semiconductor manufacturing and advanced electronics assembly
- Stable political climate and transparent business policies
- Strong IP protection regulations compared to some other developing markets
Potential challenges:
- Higher labour costs than Vietnam or Indonesia
- Certain niche components might require imports, which can add logistics overhead
- Competition with neighbouring countries means it can be more selective about the types of projects it takes on
4. Indonesia
With the largest population in Southeast Asia, Indonesia has enormous growth potential. While it may not be as mature as Thailand or Malaysia in electronics manufacturing, it’s rapidly catching up due to recent infrastructure investments, growing domestic demand, and an abundance of labour. Its focus is on low cost, high volume, low mix production, but standards f quality and reliability are good.
Key advantages:
- Large pool of labour
- Growing focus on developing infrastructure and industrial parks
- Government incentives to boost foreign investment in high-tech industries
Potential challenges:
- Infrastructure development is uneven across the archipelago; logistics can be complex, especially when operating outside main islands like Java
- Regulatory bureaucracy can be time-consuming, and navigating local business requirements demands careful planning
- The electronics manufacturing ecosystem is still maturing, which can mean fewer advanced manufacturing options compared to established hubs
5. The Philippines
Known primarily for its service-oriented outsourcing (like customer support and IT services), The Philippines also has a notable electronics manufacturing sector, particularly in semiconductors and electronic components.
Key advantages:
- English is widely spoken, simplifying communication and reducing risk of misinterpretation
- Attractive tax incentives in special economic zones
- A growing pool of engineers and technical graduates
Potential challenges:
- Labour costs tend to be higher than in Vietnam and Indonesia
- Infrastructure, although improving, still requires further development to match regional frontrunners like Thailand or Malaysia
- The overall electronics ecosystem might be smaller, so sourcing locally for specialised components could be difficult
Key considerations for outsourcing electronics manufacturing to ASEAN countries
Cost vs. Quality
It’s tempting to focus solely on labour costs, but the quality of production, reliability of suppliers, and level of technological expertise are equally critical. Workmanship errors can end up costing more in the long run.
Logistics and infrastructure
Proximity to major ports, ease of transportation, and robust infrastructure play a key role in timely delivery and reduced shipping costs. Each country has varying degrees of infrastructure development - factoring this into your choice is essential.
Supply chain and ecosystem
It’s not just about finding a contract manufacturer. You’ll also need reliable suppliers for components, packaging, and logistics services. Clusters of electronics manufacturers often benefit from co-location with component suppliers, reducing lead times and enhancing operational efficiency. It should be noted, that some EMS in the region are part of global, end-to-end outsourcing companies that can bring the full power of their internal supply chains to streamline your entire process.
Government incentives and regulations
Many Southeast Asian countries offer tax breaks, reduced tariffs, and other incentives to attract foreign investment. Familiarising yourself with local regulations, labour laws, and import/export rules can help you maximise these incentives.
Cultural and language differences
Seamless communication is paramount for ensuring that design specifications and quality standards are met. While English is commonly used in many parts of Southeast Asia, the extent of fluency can vary. Establishing clear communication channels and protocols is key.
Intellectual Property (IP) protection
IP protection laws and enforcement vary across the region. Countries like Malaysia and Thailand often have stronger legal frameworks, whereas others may still be developing robust IP protection measures. Ensure you have clear contracts and legal recourse established with partners.
Final thoughts
Outsourcing electronics manufacturing to Southeast Asia can offer significant advantages in terms of cost reduction, scalability, and market access. Vietnam, Thailand, Malaysia, Indonesia, and the Philippines each provide unique strengths, whether it’s labour availability, a skilled workforce, or advanced infrastructure. The best fit for your company will depend on your product requirements, budget, logistical needs, and long-term strategic goals.
Before you commit, it’s always wise to visit each potential location, conduct thorough due diligence on your shortlist of manufacturers, and engage local experts or consultants who understand the nuances of each market.
With the right partner and careful planning, outsourcing to Southeast Asia can be a catalyst for innovation, global expansion, and sustainable growth in the competitive electronics industry.
