Roland Berger study: Southeast Asia quickly becoming new industrial hub

With supply chains moving West to East, Southeast Asia may be shifting its role from merely the world’s workshop to a more complete value chain and industrial ecosystem. That is according to a report from Roland Berger, which points to Southeast Asia as a growing industrial hub.

Global supply chains are under a huge amount of stress. The highly integrated global supply chain model created by historical industrial relocations is undergoing a major realignment, giving way to a new multi-polar landscape defined by regional autonomy.

Roland Berger’s analysis reveals that supply chain priorities have decisively shifted from pure efficiency to ensuring security and resilience. At the center of this transformation is Asia, which is evolving beyond fragmented, multi-chain competition toward single-chain dominance and collaborative symbiosis.

The broader story is clear: Global supply chains might increasingly find a base in Southeast Asian countries like Thailand, Vietnam, the Philippines, Indonesia, Malaysia, and Singapore.

“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.

Southeast Asia

The primary destination for this industrial relocation is Southeast Asia, which is emerging as a critical midstream production hub and the main beneficiary of the ‘China-plus-one’ diversification strategies. As production costs rise in China, labor-intensive and low-end manufacturing is increasingly shifting to nations across the region.

Indonesia and the Philippines provide upstream minerals, Malaysia and Vietnam handle mid-stream electronics, and Thailand is building capacity for electric vehicle assembly. While benefiting from cost advantages, the region must address persistent gaps in talent, infrastructure, and energy to seize the full opportunity.

Southeast Asia received $226.3 billion in FDI (foreign direct investment) and generated $88.5 billion in outward direct investment. Most outward direct investment remains within the region or flows to China, with Indonesia emerging as a key recipient.

Natural resources

The huge store of natural resources in Southeast Asia is one of the main strategic advantages the region enjoys. For example, enormous nickel reserves in Indonesia and the Philippines may position Southeast Asia as a future leader in battery-cell production.

The gradual transition to green energy means that batteries (and the resources needed to make them) are increasingly in demand. Indeed, when it comes to electric vehicles, China is already arguably leading the way. Chinese EV company BYD is already the second-largest EV battery making in the world.

The challenges ahead

Asia’s modernization path, however, has not been without internal challenges. The region developed its industrial system later than the West, resulting in a system marked by commoditized low-end competition and chronic industrial overcapacity.

That means that several major Asian economies, including Japan, South Korea, and Thailand, currently operate with industrial capacity utilization below the 80% threshold, which is indicative of persistent oversupply. For that reason, there are still weak foundations in many mid- to high-end manufacturing segments, and deeper integration is delayed by fragmented regional cooperation mechanisms.

In order to keep up with the shift eastward, multinational corporations must build supply chains that are simultaneously efficient, resilient, digital, and sustainable. Key strategies include shifting manufacturing footprints to reduce exposure to a single country and building resilience through multi-sourcing critical inputs across multiple regions.

Companies should also foster collaboration across specialized clusters, leveraging the unique strengths of different Southeast Asian nations. Sustainability and renewable energy should also play a greater role, as part of the larger goal of remaining competitive and aligning with global environmental standards. Global reach, operational excellence, and next-generation productivity remain the ultimate goals in this restructured economic landscape.

“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 notes.

“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.”