Manufacturers in Southeast Asia are ramping up their efforts to attract tier 1 OEMs as the U.S.-China trade war rumbles on and labour costs continue to rise in China. We look at which countries in Southeast Asia offer a viable manufacturing and investment alternative to China and what challenges will companies face.

With “Industry 4.0” fast becoming mainstream in manufacturing, offering a new level of efficiency and productivity to those investing in them, what sparks will ignite when applied to Southeast Asia?

Bor Chun Gooi

Bor Chun Gooi

We had the opportunity to speak with Bor Chun Gooi, General Manager of Keysight Global Services -East, an expert in Keysight’s operations in Southeast Asia. Using Keysight’s long-term operation in Southeast Asia as an example, Bor Chun shares their experience in securing a foothold in the Southeast Asian market and highlighted some opportunities and challenges that companies will face when entering this new market.

Seizing opportunity in Southeast Asia

The Association of Southeast Asian Nations (ASEAN) has seen great development in recent years through their extensive manufacturing operations but are now poised to see greater growth as companies look to diversify their manufacturing. Malaysia and Singapore have already developed a mature manufacturing industry but Bor Chun tells us that Thailand and Vietnam are the nations to watch.

Samsung already has a well-established presence in Vietnam, aiding Vietnam in becoming the second largest smartphone exporter in the world. Samsung sought out the advantages of a cheap, young and plentiful Vietnamese workforce, once the hallmark of China. Of the two nations, Thailand is arguably leading the way in terms of technological development. Thailand has become the sixth largest commercial vehicle manufacturer in the world and announced an Industry 4.0 initiative in 2016, ’Thailand 4.0’.

Keysight Industry 4.0

Bor Chun explains to EE Times Asia that Keysight is already ahead of the curve with double digit growth in Southeast Asia and has been assisting organizations switch their manufacturing to ASEAN. He tells us that companies want to lower their costs but fear a lower quality testing environment. We’re given the example of a company which wanted to tear down their operation in China and relocate to Vietnam. Keysight already have a local presence in Vietnam so were able to not only set up a new testing environment, but one which is identical to that previously used in China. It’s this level of expertise provided by Keysight which is making Southeast Asia a viable option.

Transforming manufacturing through analytics

Industry 4.0 is certainly the current hot topic in today’s manufacturing world, I ask Bor Chun what aspects of Industry 4.0 are the key drivers for adoption in Southeast Asia.

“Companies want to know more, they want to collect more data so that they can do forecasts on facility maintenance, quality of output and they want to minimize downtime. A good example is asset utilisation, companies don’t usually focus on asset management in electronic testing solutions, they tend to invest and assume that people will use it. When it comes to industry 4.0, they want to look at the total structure and utilise what they already have”.

To enable a preventive approach, companies look to collect more and more data. Bor Chun highlights the power of this data when implemented correctly.

“When moving your operation to, let’s say Vietnam, a customer will still want to monitor the progress of their manufacturing plan in Vietnam. They can collect this data remotely, make centralised decisions and then they can send less expatriates as management into Vietnam”.

One of the core challenges with locating manufacturing in Southeast Asia is the low skilled work force. This will typical result in companies sending expats to oversee management of the facility. With the analytics provided by Industry 4.0 companies will be able to further lower their labour costs and empower locally recruited management.

With an expanding array of analytics at their fingertips, companies may feel more secure in their decision to relocate their manufacturing and ensure continued access to global markets.

On the other hand, Bor Chun fears that the world is adopting a deglobalisation mentality and believes that this can be witnessed with the recent wave of protectionism brought on by trade boundaries. “I strongly believe that industry 4.0 will help to create more efficiency but I also believe that there will be a requirement for manufacturing to be more spread out. This will be to ensure access to the market”.