Global Manufacturing Data: Who Are the Asia-Pacific Star Nations and How Can Technology Vendors Capitalize?

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By James Prestwood | 4Q 2023 | IN-7097

Following the release of ABI Research’s Manufacturing Market Data (MD-MMD-103), this ABI Insight provides an overview of key topline figures in the Asia-Pacific region and highlights the growing success of Association of Southeast Asian Nations (ASEAN) countries, specifically Vietnam and Malaysia. Vietnam’s government is pushing for significant increases in both the development of high-end manufacturing capabilities and supporting industries, presenting a fertile breeding ground for digital transformation, with manufacturers looking to develop global competitive production processes. 5G usage in manufacturing provides a strong indicator that supports this trajectory of digital transformation, being a key enabler of Industry 4.0 technologies. Technology vendors should aim to make themselves household names among this new generation of engineers and operators, alongside streaming go-to-market solutions to guide manufacturers through the digital transformation process, to see the greatest success in the countries.

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The State of the Asia-Pacific Manufacturing Giants


Asia-Pacific is the largest manufacturing region in the world, accounting for 45% of the world’s US$16 trillion global Manufacturing Value Added (MVA) in 2022, and since 2015, has seen a Compound Annual Growth Rate (CAGR) of 4.5%, which is larger than all other global regions (Europe, the Middle East, and Africa (EMEA)—2.8%, North America—2.2%, Latin America—2.2%). China accounts for a significant proportion of Asia-Pacific’s MVA (68% in 2022), and despite commentary around the country’s economic slowdown, will likely continue to remain the dominant manufacturing player on the world stage due to its strong global and regional trade links and continued government support of growth in high value-added manufacturing industries.

Even with the country’s stringent zero-COVID-19 policies, Chinese manufacturing markets have returned to post-pandemic levels, with the country’s manufacture of metal products seeing the most dramatic growth, increasing from US$56 billion in 2020 to US$681 billion in 2021, which is US$97 billion larger than the market size in 2019. Japan has seen a far more negative manufacturing outlook, with the manufacture of transportation equipment, the country’s largest market, falling 19% from US$682 billion in 2020 to US$552 billion in 2022 (MD-MMD-103), primarily damaged by the pandemic’s disruption to automotive sales and supply chain shortages. In fact, 8 out of 10 of Japan’s largest manufacturing verticals have seen revenue and employee numbers fall between 2020 and 2022, highlighting a more systemic issue with Japanese manufacturing beyond just pandemic-related disturbances. The country is facing a crippling aging population, continued issues with high-tech chip supply chains, and softening demand from its largest exporting market, China.

The two Asia-Pacific manufacturing giants have shown several vulnerabilities in their markets, production processes, and geopolitics over the past half a decade, leading many investors to look elsewhere in the region for ideal manufacturing bases. The ASEAN countries have looked to fit the bill and, as a result, countries such as Vietnam and Malaysia have seen strong growth.

The Growth of ASEAN


The ASEAN countries’ markets have grown in line with the general Asia-Pacific trend, with MVA seeing a CAGR increase of 4%. Vietnam has seen its MVA double over the period, increasing from US$50 billion to US$101 billion, a CAGR of 9.2%, supported by a comprehensive inflow of Foreign Direct Investment (FDI) due to the country’s relatively low cost of labor, strategic location on major trade routes, government tax breaks for high-tech companies, and extensive participation in Free Trade Agreements (FTAs). The country also possesses one of the largest labor markets in the region at 8.9 million employees, being second only to China and employing more individuals in manufacturing than Malaysia, the Philippines, Singapore, and South Korea combined. A sizable proportion of this workforce is employed in wearing apparel and leather product manufacturing (33%); however, the country also maintains strong employment bases in food manufacturing (9.6% of total manufacturing employment) and computer and electronics manufacturing (9.4%). Despite its potent manufacturing potential, Vietnam’s manufacturing sectors have significant scaling to undertake, as a lot of these manufacturing enterprises are small in scale, with many just being individuals producing a product or small shops, with the country having more than 860,000 enterprises, 30% being food and beverage establishments. To put this into perspective, China reportedly only had 413,000 manufacturing enterprises in 2021.

Malaysia, while not seeing as dramatic MVA growth as Vietnam, with MVA increasing from US$67 billion in 2015 to US$95 billion in 2022, a CAGR of 4.5%, still represents a robust and strengthening manufacturing market, with the country’s largest revenue generator being computer and electronics manufacturing. Malaysia’s manufacturing shows to be more developed than Vietnam’s with its 2.3 million employees (2021) spread over only 49,000 enterprises (2015), indicating a much greater density of workers per company in Malaysia and a higher number of large plants than Vietnam.

What Are the Opportunities for Digital Transformation in the ASEAN Market?


Manufacturing solution providers have the unique opportunity to embed their solutions as the “go to” for a new generation of manufacturing engineers and operators. Talent development is a high priority in many growing Asia-Pacific nations’ government schemes, and positioning as a “familiar face” to these workers should be of high importance, as many of them will become workers who will advocate for the usage of a specific vendor and its solutions. Investing in innovation centers, partnering with local universities, and sponsoring government initiatives, which familiarize and train students and workers on specific solutions, are all ways that technology vendors can develop their brand in these emerging markets. In the case of many developing manufacturing nations, adoption will more likely take the form of a crawl, walk, and run approach, and technology vendors that are able to streamline their go-to-market strategies to comprehensively guide manufacturers through the digital transformation process, from simple solutions such as sensors and basic data analytics, all the way through to digital twins, have the ability to benefit from the increase in manufacturing activity and technological maturing that will occur in countries such as Vietnam and Malaysia over the coming decade.

Vietnam’s government has implemented high-level targets to ensure the growth of large-scale, high-tech manufacturing development. Resolution 115 “Target for Supporting Industries,” created in 2020, states that, by 2030, manufacturing should meet 70% of domestic demand. Specific sectors such as mechanical industrial products (e.g., high-precision molds), electronics industry (e.g., materials for electronic component production), and automobile (e.g., engine details and lubrication systems) provide a comprehensive foundation for Vietnam’s ambitions for sizable, domestic investment driven, semiconductor, machine, and automotive manufacturing sectors. Continued investment in these supporting manufacturing industries is a clear opportunity and growing market for technology vendors to engage with, as manufacturers look to implement modern digital solutions to compete with established global production processes at new greenfield sites and brownfield development.

The bedrock for digital transformation in manufacturing industries within the wider Asia-Pacific region, including Vietnam, is already under construction, with significant growth in enabling tools such as 5G. Both private and network slicing 5G markets are forecast to see dramatic growth in the Asia-Pacific region and its developing countries over the coming years, with revenue growing by a CAGR of 45.4% from 2023 to 2030 in APAC developing countries (see ABI Research’s Private Cellular Network Forecasts market data (MD-PCRN-22)) and 93% from 2022 to 2028 in APAC countries (see 5G Network Slicing and Cloud Packet Core (MD-SLIC-103), respectively. Leveraging a wide range of Industry 4.0 use cases will drive digital transformation, such as big data analytics, automation technologies, and mobile management applications, with Computerized Maintenance Management Systems (CMMSs) being a prime example. Tracking the development and progress of enabling tools such as 5G in the Asia-Pacific region and ASEAN countries is critical for technology vendors to identify market hotspots where they can effectively position new innovative manufacturing solutions.