Risks

ASEAN is attempting to secure a foothold in the global semiconductor and electric-vehicle battery industries. Malaysia, Indonesia, and Thailand have each announced concrete industrial commitments that signal an ambition to move deeper into high-value manufacturing. These efforts carry strategic implications because semiconductors, power electronics, and batteries are essential inputs for artificial intelligence, renewable energy systems, and modern defense industries. The region now faces a growing set of geopolitical and engineering pressures that directly affect planned projects, cost structures, and national industrial strategies.

This piece documents the most significant national developments in 2024 and 2025, outlines precise vulnerabilities, and provides realistic mitigation measures for decision makers.

Strategic Context

In October 2025 China announced additional controls on rare-earth exports and related processing technologies. This decision briefly tightened the market for rare earth magnets and separated oxides that are crucial for EV motors and semiconductor equipment. Although Beijing later delayed parts of the policy’s implementation, the message was clear. Critical inputs can be restricted with little warning.

Meanwhile, the United States and its allies have continued to adjust export controls on chip-making equipment. Any further tightening directly affects the cost and feasibility of new packaging and test facilities across ASEAN. The strategic environment surrounding high technology has therefore become volatile and has placed pressure on firms hoping to expand into advanced electronics production.

Malaysia: Penang’s Advanced Packaging Ambitions

Malaysia is pursuing one of the most aggressive semiconductor upgrade strategies in Southeast Asia. Penang’s “Silicon Island” project and the new Green Tech Park represent a deliberate shift from assembly to higher-value packaging and design. Approved semiconductor-related investments reportedly exceeded RM 70 billion between January 2024 and June 2025. Investments include Infineon’s silicon carbide expansion and Carsem’s advanced packaging facilities for AI-related chips.

Advanced packaging and testing lines in Malaysia’s semiconductor clusters still depend on specialized lithography subsystems, ultra-high-purity precursor chemicals, and precision metrology equipment. These imports are increasingly vulnerable because Malaysia’s new export-control regime now requires notifications for high-performance AI chips and equipment, creating possible bottlenecks and compliance burdens. For example, Malaysia’s July 2025 directive made exporters notify authorities at least 30 days in advance when shipping U.S.-origin high-performance AI chips, signaling that regulatory headwinds may also apply upstream in tool and component supply chains. Without expedited import lanes, delays in receiving critical equipment would postpone factory commissioning in locations such as Penang, driving up capital costs through extended financing periods.

The Malaysian government must fast-track customs and import lanes for critical equipment, co-finance spare-parts pools for fabs, and invest in infrastructure near semiconductor clusters such as high-quality water, power reliability, and waste treatment. In parallel, public-private training centers should train large numbers of precision-manufacturing engineers.

Indonesia: Nickel Dominance and Downstream Battery Production

Indonesia has used its dominant nickel reserves to pull in major EV battery investments. The flagship project is the nearly USD 6 billion joint venture between Contemporary Amperex Technology Co. (CATL) and Indonesia Battery Corporation in West Java. According to a June 2025 Reuters report, the facility is scheduled to begin operations by late 2026 with a starting capacity of 6.9 GWh, with an expansion path toward 15 GWh or more. This scale demonstrates Indonesia’s ambition to anchor the region’s battery ecosystem, but it also highlights the limits of upstream advantage.

Despite controlling the raw material, Indonesia’s battery value chain is not yet integrated. The CATL–IBC project will still depend heavily on imported precursor chemicals, cathode active materials, and high-precision manufacturing equipment. Reuters noted that while Indonesia has rapidly expanded nickel processing, the country has not built the full suite of midstream capabilities required for stable cell production. Critical reagents and machinery remain tied to suppliers in China, South Korea, and Japan.

This dependency introduces substantial strategic risk. A February 2025 C4ADS report found that Chinese companies control roughly 75 percent of Indonesia’s nickel-refining capacity. That concentration means that although production occurs on Indonesian soil, operational control, technology flows, and strategic decisions often originate in external corporate or policy environments. Any shift in Chinese domestic policy, export priorities, or commercial strategy could ripple through Indonesia’s downstream battery plans and disrupt cell production timelines.

Given these vulnerabilities, Indonesia must accelerate the development of domestic precursor and cathode material facilities to reduce exposure to foreign suppliers. Battery-plant construction should also be sequenced with upgrades to grid capacity, wastewater management, and environmental controls, since these engineering systems remain bottlenecks in several industrial zones. Finally, manufacturers should design production lines with modularity so they can switch battery chemistries if global markets or reagent availability changes.

Thailand: Converting an Automotive Giant into an EV Hub

Thailand is moving quickly to convert its dominant automotive industry into an electric-vehicle hub. The Board of Investment’s EV 3.5 package, announced in 2025, offers tax incentives, consumer subsidies, and import-duty relief through 2027 for manufacturers that commit to local production. This policy has already shifted investment patterns. BYD opened a USD 490 million plant in Rayong in mid-2025 with capacity for 150,000 EVs annually, marking one of the largest EV manufacturing commitments in Southeast Asia. Domestic EV registrations also surged to roughly 70,000 units in 2024, up from fewer than 10,000 in 2021.

Despite these gains, Thailand’s EV ecosystem remains dependent on imported battery cells, semiconductor components, and rare-earth magnets. ASEAN Briefing’s September 2025 assessment found that Thailand still lacks mid-stream capabilities such as cathode production, electrolyte processing, and advanced battery-testing facilities. This dependence exposes the sector to the same vulnerabilities faced by regional semiconductor clusters.

These components also move through logistics systems designed for traditional automotive supply chains. Laem Chabang Port remains optimized for bulk auto parts rather than high-value lithium-ion cells. EV assemblers reported delays in 2025 due to congestion and manual customs checks on sensitive components during peak export periods. Even minor slowdowns disrupt just-in-time assembly and raise operational costs.

To protect its emerging EV advantage, Thailand must expand bonded logistics zones for battery components, accelerate port digitization, and cooperate with ASEAN partners to harmonize battery standards. Without these measures, Thailand’s EV ambitions will remain vulnerable to supply-chain friction and regulatory fragmentation.

Regional Risk Map

1. Material-concentration risk. China’s export controls on rare earths and magnets create leverage points. ASEAN must map critical-element dependencies and invest in regional recycling and stockpiles.
2. Equipment-and-technology risk. Restrictive export regimes on chip-making tools raise project execution risk. ASEAN governments should establish pooled spare-parts procurement, trusted procurement corridors, and diplomatic waiver channels.
3. Infrastructure-and-skills risk. All three countries face co-investment requirements in power, water, waste, and vocational training aligned with advanced manufacturing. ASEAN-level funding mechanisms and mutual recognition of professional certifications would reduce friction.

ASEAN stands at a pivotal moment. The opportunities to capture semiconductor back-end, EV battery manufacturing, and higher-value electronics are real. Malaysia’s move into advanced packaging, Indonesia’s downstream battery strategy, and Thailand’s EV pivot are promising. They are also fragile. Each depends on imported tools, materials, and specialized skills that can be disrupted by geopolitical shifts.

The region’s success will depend on how quickly leaders can reduce those vulnerabilities through strategic infrastructure investment, targeted industrial policy, regional standardization, and coordinated risk management. Without these measures, factories across ASEAN will remain profitable in calm markets but exposed during periods of geopolitical tension.

Pakistan has been accused of launching air strikes that killed civilians in Afghanistan, a day after three Pakistani security personnel were killed in a bombing.

Recent peace efforts and a temporary ceasefire have failed.

What’s driving the violence – and what are the risks?

Presenter: Imran Khan

Guests:

Obaidullah Baheer – Adjunct lecturer at the American University of Afghanistan

Sahar Khan – Security analyst focusing on South Asia

Hameed Hakimi – Associate fellow in the Asia-Pacific Programme at Chatham House

President Lee Jae Myung has warned risks of accidental clashes with North Korea, saying Seoul must continue to make efforts with patience to resume dialogue with Pyongyang to reduce such risks.

Lee gave the assessment on inter-Korean relations at a press conference aboard his flight from Johannesburg to Ankara on Sunday (local time), as part of his four-nation trip to Africa and the Middle East.

Inter-Korean relations have turned extremely hostile and confrontational, and North Korea is engaging in very extreme actions without even the most basic level of trust,” Lee told reporters. “We are in a very dangerous situation where accidental clashes could break out at any time.”

He renewed his call for dialogue after Seoul proposed military talks to clarify the Military Demarcation Line (MDL), aimed at preventing unintended clashes near the border. The proposal came amid repeated incidents of North Korean soldiers briefly crossing the MDL while clearing land or laying mines in the buffer zone.

Lee noted that the North has been installing triple layers of barbed wire along the MDL, raising the risk of warning-fire incidents amid differing views on the precise border line.

“With all communication channels severed, even if an accidental clash occurs, there is no way to resolve it,” he said.

To ease tensions on the Korean Peninsula, Lee underscored the need to push for dialogue with Pyongyang even if it remains unresponsive.

While reaffirming unification with North Korea is South Korea’s ultimate goal, Lee said it must be approached from a long-term perspective.

“We have no intention of pursuing unification by absorption,” he said, emphasizing that discussions on unification should come only after dialogue resumes and peaceful coexistence is established.

Asked whether South Korea could consider curtailing its joint military drills with the United States to bring Pyongyang to the negotiating table, Lee said it is premature to draw conclusions, calling the matter “the most sensitive” issue for North Korea.

He said that while a stable peace regime in which large-scale exercises are unnecessary would be desirable in the long term, decisions on drills should depend on evolving circumstances.

“If a stable peace regime is firmly established between the two Koreas, it would be desirable not to conduct the drills,” he said. “Depending on the situation, reducing or postponing the exercises could become either the result of building a peace regime or leverage to help create one. It is difficult to say at this moment which it will be.”

Pyongyang has long denounced the Seoul-Washington exercises as “war rehearsals,” while the allies claim they are defensive in nature.

On relations with China, Lee reiterated that South Korea should stably manage ties with its largest trading partner while advancing the alliance with the U.S. to a strategic comprehensive one encompassing the economy and technology.

“The basic principle of our diplomacy is the Korea-U.S. alliance, while stably managing relations with China,” he said. “The foundation of this approach is pragmatic diplomacy centered on national interests. I have clearly communicated this principle to both the U.S. and China.”

Regarding the diplomatic row between Beijing and Tokyo over Japanese Prime Minister Sanae Takaichi’s recent remarks on Taiwan, Lee called for a “cool-headed approach” guided by national interest.

He said he held separate talks with Takaichi and Chinese Premier Li Qiang on the sidelines of the Group of 20 (G20) summit in South Africa to prevent misunderstandings or conflict.

“I have explained our position in the two meetings,” he said, adding that “there are no additional risk factors” in South Korea’s relations with the neighboring nations.

South Korea, China and Japan reportedly had consultations to arrange their first trilateral summit since May 2024. But the outlook for trilateral engagement remains cloudy amid a diplomatic row between Tokyo and Beijing.

Lee said leaders he met on the sidelines of the G20 summit in South Africa and visits to the United Arab Emirates (UAE) and Egypt showed strong interest in South Korea’s defense industry.

“In particular, they were interested in joint development, production, sales and exploring new markets,” he said.

He expressed optimism in clinching a major defense deal from the UAE following his summit with President Mohamed bin Zayed Al Nahyan last week.

Lee also said Egyptian President Abdel Fattah El-Sisi outlined plans to expand Cairo International Airport under an estimated cost of around 3-4 trillion won (US$2-2.7 billion), while expressing hope that Korean companies would join the project to overhaul and operate it.

In Johannesburg, Indian Prime Minister Narendra Modi proposed establishing a cooperative framework in the shipbuilding industry involving South Korea, Japan and India, Lee added.

Ahead of his summit with Turkish President Recep Tayyip Erdogan on Monday, Lee said he wants to highlight Korea’s advanced nuclear energy capability to promote the state-run Korea Electric Power Corp. (KEPCO)’s bid to win a new nuclear plant project in Turkey.

In 2023, KEPCO submitted a preliminary bid to Turkey’s project to build its second nuclear power plant in Sinop on the Black Sea coast.

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An estimated half a trillion dollars was wiped out from the financial markets this week, as some of the biggest tech companies, including Nvidia, Microsoft, and Palantir Technologies saw a temporary but sizeable drop in their share prices on Tuesday. It may have been just a short-lived correction, but experts warn of mounting signs of a financial market crash, which could cost several times this amount.

With dependence on tech and AI growing, critics argue that betting on these profits is a gamble, stressing that the future remains uncertain.

Singapore’s central bank joined a global chorus of warnings from the IMF, Fed Chair Jerome Powell, and Andrew Bailey about overvalued stocks.

The Monetary Authority of Singapore said on Wednesday that such a trend is fuelled by “optimism in AI’s ability to generate sufficient future returns”, which could trigger sharp corrections in the broader stock market.

Goldman Sachs and Morgan Stanley predict a 10–20% decline in equities over the next one to two years, their CEOs told the Global Financial Leaders’ Investment Summit in Hong Kong, CNBC reported.

Experts interviewed by Euronews Business also agree that a sizeable correction could be on the way.

In a worst-case scenario, a market crash could wipe out trillions of dollars from the financial markets.

According to Mathieu Savary, chief European strategist at BCA Research, Big Tech companies, including Nvidia and Alphabet, would cause a $4.4 trillion (€3.8tn) market wipeout if they were to lose just 20% of their stock value.

“If they go down 50%, you’re talking about an $11tr (€9.6tr) haircut,” he said.

AI rally: Bubble or boom?

The US stock market has defied expectations this year. The S&P 500 is up nearly 20% over the past 12 months, despite geopolitical tensions and global trade uncertainty driven by Washington’s tariff policies. Gains have been strongest in tech, buoyed by optimism over future AI profits.

While Big Tech continues to deliver, with multibillion-dollar AI investments and massive infrastructure buildouts now routine, concerns are growing over a slowing US economy, compounded by limited data during the government shutdown. Once fresh figures emerge, they could rattle investors.

AI enthusiasm is most evident in Nvidia’s extraordinary stock gains and soaring valuation. The company is central to the tech revolution as its graphics processing units (GPUs) are essential for AI computing.

Nvidia’s shares have surged over 3,000% since early 2020, recently making it the world’s most valuable public company. Between July and October alone, it gained $1tr (€870bn) in market capitalisation — roughly equal to Switzerland’s annual GDP. Its stock trades at around 45 times projected earnings for the current fiscal year.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Much of this growth is backed by real financial progress, and despite the massive nominal increase in value, relative valuations don’t look overstretched.”

Analysts debate whether the current market mirrors the dot-com bubble of 2000. Nathan notes that many tech companies that failed back then never reached profitability, unlike today’s giants, which generate strong revenues and profits, with robust demand for their products.

Ben Barringer, global head of technology research at Quilter Cheviot, added: “With governments investing heavily in AI infrastructure and rate cuts likely on the horizon, the sector has solid foundations. It is an expensive market, but not necessarily a screaming bubble. Momentum is hard to sustain, and not every company will thrive.”

BCA Research sees a bubble forming, though not set to burst immediately. Chief European strategist Mathieu Savary said such bubbles historically peak when firms begin relying on external financing for large projects.

Investments in assets for future growth, or capital expenditures, as a share of operating cash flow, have jumped from 35% to 70% for hyperscalers, according to Savary. Hyperscalers are tech firms such as Microsoft, Google, and Meta that run massive cloud computing networks.

“The share of operating earnings is likely to move above 100% before we hit the peak,” Savary added. This means that they may soon be investing more than they earn from operations.

Recent examples of Big Tech firms turning to external financing for such moves include Meta’s Hyperion project with Blue Owl Capital and Alphabet’s €3 billion bond issue for AI and cloud expansion.

While AI investment growth is hard to sustain, Quilter’s Barringer told Euronews: “If CapEx starts to moderate later this year, markets may start to get nervous.”

Other factors to watch include return on invested capital and rising yields and inflation pressures, which could signal a higher cost of capital and a bubble approaching its end.

“But we’re not there yet,” said Savary.

Further concerns and how to hedge against market turbulence

Even as tech companies ride the AI wave, inflated expectations for future profits may prove difficult to meet.

“The sceptics’ main problem may not be with AI’s potential itself, but with the valuations investors are paying for that potential and the speed at which they expect it to materialise,” said AJ Bell investment director Russ Mould.

A recent report by BCA reflects the mounting reasons to question the AI narrative, but the technology “remains a potent force”, said the group.

If investor optimism does slow, “a sharp correction in tech could still have ripple effects across broader markets, given the sector’s dominant weight in global indices,” Barringer said. He added that other regions and asset classes, such as bonds and commodities, would be less directly affected and could provide an important balance during a downturn.

According to Emma Wall, chief investment strategist at Hargreaves Lansdown, “investors should use this opportunity to crystallise impressive gains and diversify their portfolios to include a range of sectors, geographies and asset classes — adding resilience to portfolios. The gold price tipping up is screaming a warning again — a siren that this rally will not last.”