Big tech players splash the cash to court S-E Asia’s young and fast digitalising population

TECH giants have been courting South-east Asia in recent weeks, with high-profile visits from senior executives with promises of eye-watering investment amounts.

Apple and Microsoft both deployed their chief executive officers on tours of the region, meeting top officials and announcing major investments in various countries.

Apple said it will spend US$250 million to expand its campus in Singapore. Earlier this month, Amazon Web Services said it would commit an additional S$12 billion to its existing Singapore cloud infrastructure.

Microsoft, meanwhile, has promised investments of US$1.7 billion in Indonesia and US$2.2 billion to Malaysia. The US company will also build a new regional data centre in Thailand.

Industry observers said the visits and investments are part of wider efforts to capture the region’s burgeoning middle class and a rapidly expanding digital economy that’s powered by a young tech-savvy population.

“This means that not only can tech companies get into the digital markets of tomorrow early, but emerging tech hubs such as Jakarta, Singapore and Ho Chi Minh City can also foster innovation and develop talent for the future,” Leslie Joseph, principal analyst at market research firm Forrester told The Business Times.

The investments from tech giants are primarily focused on artificial intelligence (AI), with money heading to a number of data centres in the region.

According to data by consulting firm Kearney, AI has the potential to contribute almost US$1 trillion to South-east Asia’s gross domestic product by 2030. The region has a population of over 660 million and a combined GDP in excess of US$3.6 trillion.

Companies and governments alike are implementing AI in their services. According to a survey by Accenture, 98 per cent of South-east Asian executives say they are intrigued by AI models, while 99 per cent believe it will enhance innovation and creativity within their organisations.

“The Singapore government is leading this charge, with others like Indonesia, Malaysia and Thailand following suit with their own AI strategies,” said Ng Wee Wei, senior managing director and market unit lead for South-east Asia at Accenture.

Mohan Jayaraman, a partner in Singapore at consultancy Bain & Company, said that the efforts to integrate the region and bring the different economies together “make it easier to approach the region as a diverse but reasonably integrated market”.

By investing heavily in South-east Asia, the world’s tech giants are showing that they are “walking the talk”, said Hanno Stegmann, managing director and partner at consultancy BCG X.

Governments in South-east Asia have rolled out policies to support digital transformation and expand their respective digital economies, as well as regulatory environments that encourage foreign investments in tech and innovation.

Stegmann said that these can contribute to South-east Asia “leapfrogging” from manual processes to ones that are fully powered by AI.

Still, observers noted that there are numerous hurdles for the region to overcome in its AI journey, with talent and regulation identified as the biggest challenges.

The region currently has a skills gap in AI, and without the appropriate skills, companies and countries are unable to effectively implement and harness AI’s potential, they said.

“The skills gap is a real challenge,” said Stegmann. “In a recent study, we found that middle managers in particular lack specialised skills and confidence in using AI.”

On regulation, analysts said that a divergence in policies could prevent a free flow of data and stunt the AI adoption rate, with countries in South-east Asia at different maturity levels with their policy frameworks around data law and AI ethics.

“Policymakers have to tread a fine balance with laws that foster innovation. At the same time, (they have to) address the plethora of risks that come with AI in a manner that is consistent region-wide,” said Forrester’s Joseph.

These issues are not just associated with generative AI, he noted, but with other predictive AI algorithms as well.

Bain’s Jayaraman said the potential for South-east Asia to leapfrog in AI adoption – just like it did for the mobile phone penetration rate – remains very high. This can be driven by stronger consumer adoption, supported by corporate investments and aided by proper regulation.

“The relatively young workforce across the region offers the right demographic dividend for fast technology adoption, on top of the deep mobile penetration across South-east Asia,” he said.

Stegmann pointed out, however, that there are always risks when companies make that big leap towards AI-powered solutions.

“Lots of change management within the organisation has to happen first to ensure that employees are equipped with the right skills and mindset to make the most of the technology,” he said.

Jensen Huang, the CEO and founder of US semiconductor company Nvidia, was in Malaysia and Singapore last December to meet business partners. He was quoted as telling reporters that he has “great confidence” that South-east Asia would become a “very important technology hub”.

“It’s already quite excellent at packaging, assembly, battery manufacturing, and very good at many aspects of the technology supply chain,” he said.