Southeast Asia's Strategic Supply Chain Dilemma Under Geopolitical Competition: The Transformation from "Connector" to "Priority"

The economic growth engine of Southeast Asia is shifting from being trade-driven to being driven by strategic supply chains centered on high technology and green transformation. Under the current macro trends of "de-risking" and "decoupling" between the two major economic powers, China and the United States, Southeast Asia, as a key "connector" economy linking the two economic blocs, has seen its strategic position highlighted, but it has also become deeply entangled in the structural dilemmas of geoeconomics.

This reshaping of geopolitics is exposing regional strategic supply chains to the direct impact of external decisions at an unprecedented speed. Strategic industries related to energy transition and frontier technologies—including semiconductors, critical minerals, solar and photovoltaic manufacturing, and electric vehicles (EVs) and lithium batteries—have become major drivers of exports and foreign investment in the region, accounting for one-fifth and half of regional export and investment projects, respectively.

However, as competition between China and the US intensifies, this "connector" role is turning into a vulnerability. As external competition grows, the region's indirect linkage networks mean that supply chains could at any time become direct targets in geopolitical games. Therefore, Southeast Asia urgently needs to transition from being a passive risk bearer to an active strategic planner, recalibrating the priorities of its industrial policies.

Among the many strategic sectors, this article focuses on four most decisive supply chain clusters: semiconductors, critical minerals, solar and photovoltaic (PV) manufacturing, and the electric vehicle ecosystem. Research indicates that despite increased geopolitical pressure, these strategic supply chains still provide a strong growth path for the region. The experience of emerging economies in nurturing technology-intensive industries while trying to catch up with developed economies suggests that viewing strategic supply chains as a key path to building long-term economic resilience holds great potential, as it can bring synergistic effects in terms of high-skilled labor and economies of scale.

The key lies in balancing proactive industrial policy intervention with real resource constraints. When governments formulate industrial policies, they must possess the ability to calibrate judiciously, ensuring that interventions match the national market size and fiscal space, avoiding high costs or counterproductive outcomes due to poorly designed policies. In areas with limited opportunities, such as critical minerals and solar PV manufacturing, policy intervention should be cautious, channeling limited fiscal and institutional resources toward areas with higher potential economic returns, such as semiconductors and electric vehicles.

In the long run, regional coordination will be the winning strategy. In areas such as semiconductor investment, building the EV ecosystem, cultivating skilled talent, and managing critical minerals, ASEAN nations need to strengthen policy coordination to unify national strategies and jointly cultivate these long-term competitive industrial clusters. Furthermore, accelerating the achievement of carbon neutrality goals at the regional level will not only bring synergistic benefits to the demand side but also provide a more solid long-term competitive advantage for these strategic supply chains.

In summary, the future prosperity of Southeast Asia no longer depends solely on trade facilitation between regions, but rather on its ability to transform geopolitical challenges into structural opportunities for key technologies and green transformation through precise industrial focus and efficient policy coordination within a fragmented and uncertain global economic landscape.