ASEAN's balancing act between US and China in AI development
Southeast Asia navigates competing tech ecosystems while building its own AI infrastructure.
1The global AI divide
The US-led Pax Silica (launched December 2025) and China's WAICO (July 2026) represent competing visions for AI governance. While Pax Silica focuses on securing semiconductor supply chains, WAICO promotes accessible AI for emerging economies with 29 founding members. US officials increasingly demand exclusive alignment, as shown by a draft letter stating 'to be part of everything is to be part of nothing'. This binary approach pressures neutral parties like ASEAN to choose sides in the tech cold war.
2ASEAN's strategic advantages
Southeast Asia offers data center operating costs 30% below global averages, mature manufacturing infrastructure, and rapid AI adoption. Malaysia accounts for 13% of global semiconductor packaging, while Indonesia's 360 MW Batam campus will host 170,000 Nvidia accelerators by 2027. The region's digital economy grew 15% YoY in 2026, with Thailand's EV sector and Singapore's regulatory frameworks becoming particular strengths. These assets make ASEAN crucial for both US and Chinese tech ambitions.
3Malaysia's neutral stance
As the world's 6th largest semiconductor exporter (44.3% of national exports), Malaysia explicitly maintains technological neutrality. Former Trade Minister Azmin Ali confirmed access to both NVIDIA and Huawei chips is essential. The country produces only 5,000 engineering graduates annually against demand for 50,000, highlighting talent gaps. With $32B in semiconductor investments announced for 2026-2030, Malaysia's packaging capabilities position it as a critical but independent node in global AI supply chains.
4Singapore's regulatory power
The city-state leverages scarce resources to become a 'responsible AI' benchmark, attracting $4.2B in data center investments in 2026 alone. Its Green Data Center Standard reduces energy use by 40% compared to regional peers. Singapore hosts Anthropic's Asian HQ while maintaining ties with Chinese firms like Alibaba Cloud. This delicate balance stems from its unique position - US security ally since 1966 but China's largest trading partner in ASEAN since 2020.
5Indonesia's resource play
With 17,000 islands offering abundant land, Indonesia targets AI infrastructure despite power shortages. The Australia-Singapore-Indonesia joint venture in Batam exemplifies this strategy. 2026 blackouts exposed vulnerabilities as coal/gas provide 70% of generation. The archipelago plans 5.3GW of solar by 2030 but faces $60B grid modernization costs. Its 'talent dividend' of 270M young people remains underutilized with only 8% in tech-related fields.
6Energy constraints
ASEAN's AI ambitions face energy bottlenecks - Vietnam needs $15B for grid upgrades, Thailand's EV push strains its 45% fossil-dependent grid, and Philippines' nuclear program won't deliver before 2035. The 2026 regional blackout caused $3B in losses, revealing systemic fragility. While Malaysia explores small modular reactors, most nations rely on patchwork solutions. Energy insecurity could force earlier alignment with either US or Chinese tech standards.
7Talent shortages
ASEAN faces a 1.2M tech talent gap by 2030. Cambodia and Laos lose 60% of STEM graduates to overseas jobs, while Indonesia sees 40% of top AI specialists emigrate. Singapore's Global Talent Visa attracted 8,000 tech workers in 2026 but drained neighbors. Regional upskilling initiatives like Malaysia's Digital Talent Fund (RM500M) show limited impact - only 12% of trainees transition to AI roles. This brain drain undermines sovereign AI development.
8The middle path
ASEAN's unique position allows selective cooperation - adopting Chinese manufacturing AI while using US cloud infrastructure. Indonesia's Nvidia deployment alongside Huawei 5G networks exemplifies this pragmatism. However, US export controls (like June 2027's Anthropic restriction) and China's pricing advantages (40% cheaper AI services) make neutrality increasingly difficult. The bloc must accelerate energy transitions and talent development to maintain strategic autonomy in the AI era.
Original article: Fortune | FORTUNE — ASEAN's balancing act between US and China in AI development