Key Drivers of Growth

Domestic Consumption

One of the primary drivers of economic growth in Malaysia, Thailand, and Vietnam is the rise in domestic consumption. The countries all have burgeoning middle classes, increasing urbanization, and higher disposable incomes that contribute to robust consumer spending.

Malaysia, Thailand, and Vietnam continue to attract substantial foreign direct investment (FDI) due to their strategic locations, competitive labor costs, and favorable investment climates. FDI doubled in Malaysia in 2024 and grew 38% in Thailand. Vietnam remained flat at $38 billion but topped both Malaysia and Thailand. Approximately 25% of the GDP in each of these countries comes from the manufacturing sector. As expected, a substantial portion of the FDI is directed toward manufacturing. This also means that machine tool imports are significant in both size and growth.

Global Manufacturers Exit China

While reshoring of production has made headlines in America, a similar trend has emerged that has benefited Southeast Asia. Amid rising costs, tariffs, and geopolitical tensions, some global manufacturers are shifting production completely outside of China; less aggressive manufacturers are diversifying their supply chains by setting up new factories in nearby Southeast Asia. This strategy is referred to as the “China Plus One” strategy.

Examples of both scenarios include a wide range of industries:

• Malaysia: Intel, Infineon Technologies, Nvidia, Masimo

• Thailand: Foxsemicon Integrated Technology Inc., Delta Electronics, Michelin, Great Wall Motors (China)

• Vietnam: Samsung Electronics, Apple, Foxconn, Intel, Nike

Opportunities for Machine Tool Industry Sales

Malaysia: 'The Silicon Valley of the East'

The city of Penang, Malaysia, earned the nickname “The Silicon Valley of the East” in the 1970s, when Intel made substantial investments in factories. They were soon followed by AMD, Hitachi, and Hewlett-Packard. The industrial base in Penang has diversified to include electronics, medical, and precision-engineered parts. In the middle of Malaysia is its capital, Kuala Lumpur, where manufacturing is more centered around automotive and general industry. Finally, in the southern region just across from Singapore, there is Johor Bahru. This area could be called Singapore’s Mexico, as many Singaporean firms have set up facilities in the region. Major industries include aerospace and MRO, electronics, chemicals, petrochemicals, and plastics. In 2024, Malaysia received $20 billion in FDI, which is about half of what Thailand and Vietnam each received.

Highlighted Investments:

• In August 2024, Insulet Corp., a tubeless insulin pump manufacturer, announced plans to expand its Malaysian manufacturing plant in the coming years as part of the company’s $200 million investment in Joho Bahru.

• Plexus Corp. announced in July 2024 a $240 million investment in facilities to expand their semiconductor capital equipment business, supporting Malaysia’s New Industrial Master Plan 2030, and continue supporting the growth of leading health care and life sciences companies.

• In December 2023, inTEST Corp., a global supplier of innovative test and process technology solutions for use in manufacturing and testing in key target markets, announced an investment of $47 million for a new Center of Excellence in Penang, Malaysia, that will co-locate sales, engineering, service, and manufacturing for all three of its business divisions.

• In December 2023, Compuware Technology Inc., a server power supply leader, announced an investment of over $1 billion to establish an additional four factories in Malaysia to meet the growing global demands for data centers, servers, and AI applications.

Major Exhibition: Metaltech, May 14-17, 2025

Thailand: 'The Detroit of Southeast Asia'

The world’s fifth-largest producer of motorcycles, Thailand’s machine tool market is primarily driven by automotive production. Thailand produces just under 2 million units per year, with about half of them exported. The uncertainty in the shift from ICE to EV platforms has left the market for machine tools in the doldrums, but optimism is growing that 2025 will bring a rebound in automotive sales – and with it, a recovery in the machine tool industry. China and its EV platforms are the main challengers to the incumbent Japanese auto producers with ICE and hybrid platforms.

Highlighted Investments:

• Harley-Davidson announced a $72 million investment to expand production lines in Thailand.

• Western Digital, the world’s leader in hard drive disk production, announced a $693 million expansion to build new factories to grow their production capacity. The company’s facility in Thailand, which currently employs 28,000 people, produces some 80% of the world's hard disks, according to the Board of Investment in Thailand.

• Phononic, a global leader in sustainable solid-state cooling, completed a $27 million investment in Thailand for 2024. This investment includes the launch of a wholly owned subsidiary in Thailand, which serves as their APAC headquarters.

• Advanced Energy is currently constructing a manufacturing facility with an overall investment of $230 million. They design and manufacture highly engineered precision power conversion, measurement, and control solutions for mission-critical applications and processes.

• Toshiba Thailand (Japan/Thailand) has announced an investment of $207 million to expand production of refrigerators, washing machines, air conditioners, and small appliances.

Major Exhibition: Thai Metalex, Nov. 19-22, 2025

Vietnam: 'The Rising Tiger of Manufacturing' in Asia

Vietnam is the fastest-growing economy in the region. A key factor for their success can be attributed to being the fifth-largest exporter to the United States. From the perspective of the machine tool industry, the northern region of Vietnam is highly focused on Samsung Electronics and Apple and their supply chains. The southern region, on the outskirts of Ho Chi Minh City, is more focused on general machining and mold and die. One of the southern region’s biggest scores was winning an investment of $1 billion from the Lego Group to set up one of the most highly automated plastic part production facilities in the world.

Highlighted Investments:

• Boeing established a permanent office in Hanoi. The company has been working with local suppliers to produce parts and raw materials for its commercial airplane programs. Examples of this include KP Aero, a South Korean aviation industry supplier, which plans to invest $20 million in a factory in Da Nang. Additionally, Universal Alloy Corp. has invested $170 million in a factory in the Da Nang Hi-Tech Park to produce components for Boeing and Airbus.

• Johnson Health Tech Co. announced in August 2024 that it will invest $100 million in an exercise equipment manufacturing and assembly hub in northern Vietnam, which would be largest of its kind in the world.

• Hon Hai Precision, also known as Foxconn (Taipei, Taiwan), is making two investments totaling $400 million in factories in the electronics sector.

• Pegatron (Taipei, Taiwan) has begun construction of a new factory in northern Vietnam. Over the next two years, the company will continue to implement the project with a total investment of up to $500 million.

Major Exhibition: MTA Vietnam, July 2-5, 2025

For more information, please contact Mike Lauer at mlauer@AMTonline.org.