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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.

Young Palestinians in Gaza have used parts and fuel from abandoned Israeli military vehicles to create a pump to supply clean water for their community.

A special operations team is pinned down in a valley deep inside contested territory. Ammo is running low, and close air support is nonexistent. Extraction forces are still hours out. The operatives have kept the enemy at bay, but their ability to do so is dwindling with every round they fire. Their stocks of 40mm grenades have long been exhausted; now their rifles will soon run dry too. The sky cracks with a sonic boom, which echoes across the valley, and fighting pauses for a split second as fighters on both sides look up. Soon after, the shooting resumes, but out of the blinding sun comes a capsule stuffed with ammunition hanging on a parachute and flying right toward the special operations team.

Help has arrived… From orbit.

The above is a scene that sounds like it’s ripped right out of a Call Of Duty: Modern Warfare video game, but one company is working to make it a reality.

California-based space startup Inversion has unveiled its design for a fully reusable, lifting-body spacecraft named Arc. The spacecraft is intended to deliver critical cargo from space to any point on Earth within an hour, landing on water, snow or soil with a precision of around 50 feet, the company says. The concept, aimed squarely at the defense sector, reflects longstanding U.S. military interest in using space-based systems to rapidly move cargo around the globe to meet commanders’ urgent needs.

The mission concept involves the Arc spacecraft being launched into low Earth orbit atop a rocket. Arc then remains in orbit until its cargo is required to be delivered. At that point, the spacecraft uses a deorbit engine to re-enter the atmosphere, moving at very high speed. Arc uses small thrusters and large trailing-edge maneuvering flaps to adjust its position and speed during its fiery reentry, through the atmosphere, until it approaches the ‘drop zone.’

Once it has reached a lower altitude, Arc slows down and lands using its actively controlled parachute system. This is also able to fine-tune the spacecraft’s path back to Earth. The parachute ensures a soft landing, meaning that Arc can then be reused. The entire mission is uncrewed, with the Arc being commanded by autonomous control systems.

Interestingly, Inversion’s plan to field a spacecraft that’s able to put a cargo at any place on Earth within an hour has parallels with an ambition laid out by U.S. Transportation Command (TRANSCOM), back in 2020. TRANSCOM provides transportation services and solutions to all branches of the armed forces, as well as various other defense and governmental organizations.

Speaking back then, U.S. Army Gen. Stephen R. Lyons, TRANSCOM’s commander, said: “Think about moving the equivalent of a C-17 payload anywhere on the globe in less than an hour. Think about that speed associated with the movement of transportation of cargo… There is a lot of potential here…”

At that point, TRANSCOM had begun a partnership with both SpaceX and Exploration Architecture Corporation (XArc) to pursue space-based rapid delivery concepts. SpaceX has since been working with the Air Force and Space Force on the ‘Rocket Cargo’ program, which seeks to quickly deliver cargo anywhere on Earth that can support a vertical landing.

It should be noted, however, that the sizes of payloads that Arc will be able to deliver are much smaller than those outlined by Lyons. The spacecraft itself will measure only around eight feet by four feet.

The C-17 has a maximum payload of around 82 tons, although normal payloads are around 60 tons or less. Arc is reportedly planned to have a cargo of just 500 pounds. Still, small cargoes often require very big logistics. As we have noted in a prior piece:

“Even the Navy has said in the past that when ships encounter problems as a result of logistics-related issues that leave them partially mission capable or non-mission capable, 90 percent of the time this can be resolved by the delivery of a component weighing 50 pounds or less.“

Nevertheless, Inversion clearly sees a niche for the very high-speed delivery of what it describes as “mission-enabling cargo.”

Inversion doesn’t provide any specific examples of the kinds of cargoes that might be delivered by Arc, beyond “equipment, food, or other mission cargo.” Conceivably, key cargo could comprise time-sensitive equipment and ammunition needed at forward operating locations. Since these spacecraft would be pre-launched, they would likely be filled with a range of generic cargoes that are generally time-sensitive. Then, they would be deorbited on demand.

Today, other small autonomous resupply systems have been used in combat, like the paragliding Snow Goose, and others are in development or limited use now. But these systems fly exclusively within the atmosphere and are much slower, more vulnerable, and require regional basing or an aerial delivery platform to launch them from relatively nearby.

Bearing in mind the considerable cost of a space launch, these cargoes would presumably only be delivered in the most critical scenarios, the kinds where only a high-cost rapid transport would suffice.

Such a capability would appear to have particular relevance in the context of future contingencies in the Indo-Pacific theater. With a growing expectation that this region will see a future high-end conflict involving the U.S. military, the ability to call upon space-based systems, like Arc, to quickly bring critical supplies to the area could be of high value — provided, once again, that the technology can be mastered.

Since Arc is reusable, that would go some way to making it more cost-efficient, when the vehicle can be recovered. Inversion also proposes putting several Arc vehicles into orbit at the same time (it’s unclear if these would be transported by the same or different rockets). The result has been described as something like a series of “constellations” with a variety of contingency cargoes that could be tailored to different customers and operational theaters.

Each Arc vehicle is reportedly able to remain in orbit for up to five years.

Another advantage compared to other space-based cargo-delivery concepts is the fact that Arc uses a parachute landing system.

Arc can, in theory, deliver cargo to any place on the planet, including remote regions, disaster zones, or hard-to-access theaters of war. Other orbital delivery concepts, such as suborbital VTOL rockets, have needed at least some kind of infrastructure to support the cargo-recovery part of the mission, but Arc should do away with that requirement, at least for small cargoes.

Last month, Inversion conducted precision drop-testing to prove the actively controlled parachute system that ensures that Arc will be able to put its cargoes where they are needed.

The company now says it wants to conduct a first mission with Arc as early as next year, which seems highly ambitious.

On the other hand, the startup does have some valuable experience from its Ray spacecraft, Inversion’s first, which was launched in January of this year as part of SpaceX’s Transporter-12 mission. This test mission helped prove technologies, including solar panels, propulsion, and separation systems, which will be incorporated into Arc.

For the time being, Inversion is focused solely on Arc’s military potential, although there would clearly be specific commercial applications as well. There is also the question of the possibility of adapting Arc as a reusable and recoverable satellite or even orbital supply vehicle. Meanwhile, the company has spoken confidently of producing hundreds of examples of the spacecraft every year.

Before that happens, and presuming military customers are forthcoming, Inversion will need to prove that its concept of space-based cargo deliveries can be cost-effective. There will also be various other regulatory issues to overcome, bearing in mind that this is an altogether new kind of transportation system.

Despite multiple dead ends and abortive programs, the idea of using some kind of space-based solution for rapid transport across the globe is one that won’t go away. Potentially, with its much smaller cargo loads, reusable spacecraft, and parachute-landing system, Inversion’s de-orbit on-demand cargo concept could be the one that finally breaks the mold.

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