# AI and Compute Infrastructure: Shaping ASEAN’s Digital Foundation

- Link: https://www.thailand-business-news.com/set/297833-ai-and-compute-infrastructure-shaping-aseans-digital-foundation
- Published: 2026-05-29T03:09:00+07:00
- Author: SET News

**ASEAN is transforming from a digital consumer to a digital infrastructure hub,
crucial for AI and compute ecosystems. Geopolitical shifts and rising demand for
data centers drive regional competitiveness, with significant foreign investments.**

---

## ASEAN at an AI Inflection Point

ASEAN is navigating a significant transition from being a region of digital consumption
to one of digital infrastructure formation. As global supply chains reconfigure,
the ASEAN-6 economies are positioning themselves as critical nodes in the global
artificial intelligence (AI) and compute ecosystem. This shift is driven by the 
recognition of computing infrastructure not merely as a utility, but as a strategic
asset essential for national competitiveness and economic resilience.

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The region’s evolution is occurring against a backdrop of geopolitical diversification,
often described as the [**China Plus One**](https://www.retailbankerinternational.com/comment/china-plus-one-what-it-means-for-asean-countries/?cf-view)
strategy, where multinational enterprises seek to diversify their production and
digital footprints.

Consequently, ASEAN is witnessing a structural reconfiguration where data centres,
semiconductor manufacturing, and connectivity networks are converging to form a 
regional digital backbone. This infrastructure is foundational to the region’s digital
economy, which is projected to [reach $2 trillion by 2030](https://www.weforum.org/stories/2025/10/asean-defa-digital-economy-pact-negotiations/),
supported by frameworks such as the ASEAN Digital Economy Framework Agreement (DEFA).
The trajectory suggests a move toward deeper integration into global value chains,
specifically in high-value segments like semiconductor packaging and hyperscale 
data processing.

### The Surge in Compute Demand

Demand for compute capacity within ASEAN is being driven by a confluence of **enterprise
modernization, public sector digitalization, and the proliferation of latency-sensitive
applications**, such as real-time AI inference, online gaming, and digital payments
and financial trading.**  **

Enterprise adoption of AI is accelerating, with businesses increasingly migrating
workloads to the cloud to leverage data analytics and generative AI capabilities.

The consumption patterns are distinct across the region. In financial hubs like 
Singapore, demand is characterized by high-performance computing required for fintech
and advanced AI modeling. In emerging digital markets like Indonesia, Vietnam and
Philipines, demand is propelled by consumer internet usage, e-commerce platforms,
and a young demographic driving data generation. Furthermore, the rollout of 5G 
networks across the region is catalyzing the need for edge computing to support 
Internet of Things (IoT) applications and real-time processing.

Public sector initiatives are also significant demand drivers. Governments are digitizing
services, as seen in Singapore’s Smart Nation initiatives and Indonesia’s 100 Smart
Cities program, necessitating robust domestic compute capabilities. Consequently,
the region is facing a requirement to expand data centre capacity significantly.
The Asia-Pacific (APAC) region is projected to account for 34% of global operational
capacity for data centres by 2028, with ASEAN contributing 51% of the pipeline in
key APAC markets.

### Data Centres as Strategic Infrastructure

The six largest ASEAN economies – Indonesia, Malaysia, the Philippines, Singapore,
Thailand, and Vietnam – are rapidly positioning themselves as the next global hubs
for data centre development, with [power demand for data centres](https://www.woodmac.com/link/02bb1cab9316465290706a0e34ee59a1.aspx)
set to quadruple from 2.6 GW to 10.7 GW between 2025 and 2035, accounting for 3-
4% of peak demand by 2035.

The deployment of data centres across ASEAN-6 reflects a divergence in strategy 
and resource availability.

**Singapore** remains the region’s primary hub, [hosting significant capacity](https://www.woodmac.com/news/opinion/southeast-asian-data-centre-power-demand-is-set-to-explode/#:~:text=In%20Southeast%20Asia%2C%20power%20demand,Wood%20Mackenzie's%20base%2Dcase%20scenario.).
However, land and energy constraints have led to a more selective approval process
for new facilities, emphasizing high energy efficiency and sustainability standards.

This constraint in Singapore has generated spillover effects, benefiting neighboring
markets. **Malaysia**, particularly the Johor region, has emerged as a major beneficiary,
attracting hyperscale investments due to its proximity to Singapore and lower land
and power costs. Malaysia has the biggest data centre project pipeline in Southeast
Asia, accounting for 3.4 GW, or 60%, of all proposed projects across the region.

**Indonesia **continues to expand its capacity, primarily in Greater Jakarta and
Batam, with a focus on serving its massive domestic market.

**Thailand** has seen a marked increase in investment activity. [The Board of Investment (BOI) ](https://www.boi.go.th/index.php?page=press_releases_detail&topic_id=138493&_module=news&from_page=press_releases&language=de)
reported a 67% surge in investment applications in 2025, largely driven by data 
centre and cloud service projects valued at approximately US$ 24 billion.

**The** **Philippines** is also pursuing hyperscale ambitions, though it faces challenges
regarding [high electricity costs](https://www.eco-business.com/news/high-costs-higher-risks-can-the-philippines-power-its-data-centre-hub-ambitions/)
and grid reliability issues.

**Vietnam** is experiencing growth driven by data localization regulations, though
it must navigate infrastructure upgrades to support larger facilities. While the
country presently has the smallest projected data centre capacity in the region,
it has set an ambitious target to place among the top 50 globally in the ICT Development
Index and to become the third-largest digital economy in ASEAN by 2030.

### Hyperscalers Major Contributors to FDI in ASEAN

**Chart 2: ASEAN – Top five industries by announced greenfield investment, 2023 
and 2024 (Billions of dollars)**

Source: [ASEAN Investment Report 2025](https://asean.org/wp-content/uploads/2025/10/AIR2025_rev17-Okt.pdf)

According to analysis in the ASEAN Investment Report 2025, announced greenfield 
investment in electronics and electrical equipment increased by 15% to US$31 billion,
reflecting sustained momentum in semiconductors and printed circuit boards.

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Meanwhile, greenfield investment in the information and communication sector rose
43% to US$30 billion, driven by accelerating demand for data centres, cloud infrastructure,
data processing, and broader digital activities.

Foreign Direct Investment (FDI) in digital infrastructure has surged, with global
hyperscalers establishing cloud regions to secure market share and comply with data
sovereignty requirements. Amazon Web Services (AWS), Google, and Microsoft have 
committed multi-billion-dollar investments across Thailand, Malaysia, and Indonesia.
For instance, AWS [launched a region in Malaysia in 2024](https://aws.amazon.com/blogs/aws/now-open-aws-asia-pacific-malaysia-region/)
with a substantial investment pledge, and Google launched a [new cloud region in Thailand](https://cloud.google.com/blog/products/infrastructure/google-cloud-launches-new-region-in-bangkok-thailand),
a key milestone in their $1 billion investment in the country’s digital infrastructure.

As latency becomes a critical performance metric for AI and IoT applications, infrastructure
is also moving closer to the user. Edge computing is gaining traction, particularly
in archipelagic markets like Indonesia and the Philippines where centralized data
centres cannot efficiently serve all remote populations.

The expansion of 5G networks across the region is a primary driver, necessitating
localized data centres to handle the influx of mobile data traffic and enable real-
time processing. Telcos are playing a pivotal role here; for example, SK Telecom
has partnered to develop [AI data centres in the region](https://www.businesskorea.co.kr/news/articleView.html?idxno=255496),
starting with Vietnam, signaling a convergence of telecommunications and compute
infrastructure.

### Semiconductor Manufacturing Accelerates

The symbiotic relationship between compute infrastructure and semiconductor manufacturing
is becoming a central theme in ASEAN industrial policy.

**Malaysia**, already a global hub for semiconductor packaging and testing, has 
introduced a National Semiconductor Strategy to move up the value chain into integrated
circuit design and advanced packaging. This aligns with the friendshoring trend,
where global firms diversify supply chains to politically stable regions.

**Vietnam** is aggressively pursuing semiconductor capability, aiming to train 50,000
engineers by 2030 and attracting investments from major players for packaging and
testing facilities, such as Intel, Samsung, and Amkor.

**Singapore** continues to lead in advanced manufacturing and wafer fabrication,
serving as a high-value anchor for the region’s semiconductor ecosystem. [The city-state currently accounts for](https://www.ifastgm.com.sg/igm/article/view/rcms336925/#:~:text=The%20city%2Dstate%20currently%20accounts,10%25%20of%20total%20semiconductor%20output.)
5% of global wafer fabrication capacity, 20% of semiconductor equipment production,
and 10% of total semiconductor output.

**Indonesia** primarily participates in the back end (assembly, testing, and packaging)
and materials segments of the semiconductor global value chain. The country hosts
back-end manufacturing facilities for several major Integrated Device Manufacturers(
IDMs). Companies with an IDM presence in Indonesia include Infineon Technologies,
Renesas, Rohm, Sanken Electric, and Toshiba.

The **Philippines** and **Thailand** are also integrated into this hardware supply
chain, primarily in assembly and testing. The region’s collective capacity is vital
for the AI hardware supply chain, as AI applications drive demand for specialized
chips and high-performance computing hardware. This integration allows ASEAN to 
function not just as a user of compute power, but as a critical producer of the 
underlying hardware.

### The Role of Software Ecosystems & Sovereign AI 

While infrastructure creates the foundation, the software ecosystem defines utilization.
Singapore has [advanced its National AI Strategy 2.0](https://introl.com/blog/singapore-ai-revolution-27-billion-investment-2025),
focusing on becoming a global centre for responsible AI thought leadership and deployment.
Indonesia has also articulated a National AI Strategy to guide adoption in healthcare
and bureaucracy.

The startup ecosystem is responding to these signals. In 2024, Singapore hosted 
approximately 44% of the [region’s Generative AI startups](https://genaifund.ai/wp-content/uploads/2024/09/ASEAN-GenAI-Startup-Report-2024-by-GenAI-Fund.pdf),
according to a survey of 250 GenAI-native startups surveyed by GenAI Fund, followed
by Vietnam at 27%, indicating a concentration of development talent. However, a 
talent gap persists. While infrastructure can be built relatively quickly, the human
capital required to develop and manage AI systems is slower to accumulate.

The ASEAN Responsible AI Roadmap attempts to address governance and skills at a 
regional level, promoting ethical standards and harmonized regulations to foster
a trusted environment for AI development.

### Singapore

**NAIS 2.0: **S$1B investment for AI computing & talent; “AI for the Public Good”
focus
**Model AI Governance Framework & AI Verify: **responsible AI testing toolkit

**Green Computing Funding Initiative: **S$30M for energy-efficient software R&D
**
RIE 2025 Plan: **S$13.6B (2021–2025) for semiconductor R&D and innovation**Manufacturing
2030: **embeds semiconductor plans for high-value manufacturing**Green Data Centre
Roadmap: **DC-CFA process; targets PUE ≤1.3 and green energy**Digital Connectivity
Blueprint: **sustainable growth standards; aims to double submarine cable landings****

### Malaysia

**AI Untuk Rakyat: **national program to increase AI literacy among citizens
**NIMP
2030: **focuses on tech adoption and digitalization across industries

**Malaysia National AI Office (NAIO): **aims to accelerate the nation’s AI adoption,
promote innovation, and ensure the ethical development of AI.
**National Semiconductor
Strategy (NSS): **RM25B (~US$ 5.3B) fiscal support; three-phase plan: Building Foundations
→ Moving to the Frontier → Innovating at the Frontier**Golden Pass: **specialized
tax incentives for front-end manufacturing and IC design**Digital Ecosystem Acceleration(
DESAC): **incentive scheme for data centres adopting green technology**Green Lane
Pathway (TNB): **expedited electricity supply; reduces power infrastructure lead
times

### Vietnam

**National Digital Transformation Programme: **targets top 50 ICT ranking by 2030;
drives demand for compute and AI infrastructure
**National Strategy (Decision No.
1018/QD-TTg): **2030–2050 roadmap using “C = SET + 1” formula(Chips, Specialized,
Electronics, Talent, +Vietnam)**Law on Digital Technology Industry (eff. 2026): **
preferential CIT rates (10% for 15 yrs; up to 37 yrs for large projects); land rent
exemptions

**Investment Support Fund (Decree 182/2024): **cash grants; up to 50% of R&D costs
covered
**100% Foreign Ownership: **Law on Telecommunications 2023 allows full foreign
ownership in data centre services**National Digital Transformation Programme: **
targets top 50 ICT, driving compute infrastructure demand** **

### Thailand

**AI for All Thais: **initiative to train 1 million citizens in AI skills
**Digital
Technology Foresight 2035: **addresses blockchain, AI, and data privacy trends**
National Semiconductor Board (est. 2025): **chaired by Prime Minister; steers national
strategy**BOI Advanced Electronics Incentives: **10-yr tax exemption for front-end
wafer fab; 8-yr for advanced IC & PCB machinery**BOI Incentive Schemes (revised 
2025): **tiered structure: High-Efficiency DCs (8-yr CIT exemption);Other DCs (5-
yr); criteria based on PUE and water usage

### Indonesia

**National AI Strategy 2020–2045: **guides public service digitization and regulatory
frameworks
**Making Indonesia 4.0: **prioritizes AI, automation, and IoT in manufacturing**
Downstreaming Industry Strategy (2023–2040): **domestic processing of silica & nickel
to support semiconductor, EV battery, and solar panel manufacturing**Special Economic
Zones (SEZs): **e.g. Nongsa Digital Park: up to 20-yr tax holidays, 100% foreign
ownership, streamlined permitting for data centres and cloud

### Philippines

**National AI Strategy Roadmap 2.0: **positions country as centre of excellence 
in AI R&D
**Center for AI Research (CAIR): **new institution supporting the AI Strategy**
Green Lanes (Executive Order): **expedited permits and licenses for strategic semiconductor
investments**CREATE MORE Bill: **enhanced incentives addressing power costs for 
energy-intensive industries

**Administrative Order No. 31: **advisory council to enhance global competitiveness
of the semiconductor industry
**Strategic Investment Priority Plan (SIPP): **classifies
data centres as strategic investments eligible for tax incentives**Digital Cities
2025: **expands digital infrastructure and IT-BPM capacity beyond Metro Manila

Regionally, the ASEAN Digital Economy Framework Agreement (DEFA) aims to harmonize
digital trade rules, potentially doubling the regional digital economy by 2030 by
reducing fragmentation and facilitating cross-border data flows.

### Structural Constraints & Risks

Despite the capital inflows, structural constraints pose significant risks to the
realization of ASEAN’s digital backbone. Power availability is the most acute constraint.
The energy intensity of AI workloads threatens to overwhelm grid capacity in specific
locales. For instance, data centre power demand in Malaysia is expected to rise 
sharply, potentially straining national power reserves if grid upgrades do not keep
pace.

Sustainability is a collateral risk. The cooling requirements for data centres place
pressure on water resources, and the carbon footprint of expanded compute capacity
challenges national decarbonization goals. Regulatory fragmentation remains a hurdle;
disparate data privacy laws and localization requirements across the ten member 
states create compliance costs that can deter regional scaling.

Furthermore, the talent war is intensifying. A shortage of skilled engineers and
AI specialists is evident across Vietnam, Thailand, and Indonesia, potentially creating
a ceiling on how fast the digital economy can expand. There is also a risk of infrastructure
overbuild in specific sub-markets if speculative investments outpace actual tenant
demand, a phenomenon observed in previous infrastructure cycles.

### Conclusion: Building a Regional Digital Backbone

ASEAN-6 is transitioning from a digital consumption market to a strategic production
hub for the global AI economy. Supply chain diversification and enterprise demand
have attracted large-scale investments from hyperscalers and semiconductor firms,
positioning the region as a key node in global digital infrastructure.

Growth is complementary, not uniform. Singapore anchors high-value R&D, financing,
and chip design, while Malaysia, Vietnam, and Thailand scale packaging, testing,
and hyperscale data hosting. This division of labor enables ASEAN to offer an integrated,
end-to-end digital supply chain.

However, there are structural constraints. AI-driven energy demand is pressuring
grids and decarbonization targets, requiring accelerated renewable deployment and
grid upgrades. At the same time, engineering talent shortages remain a binding bottleneck.

ASEAN’s long-term competitiveness will hinge on aligning national industrial strategies
with regional integration. As initiatives like the ASEAN Digital Economy Framework
Agreement (DEFA) progress, regulatory harmonization and infrastructure interoperability
will determine whether the region evolves into a cohesive and resilient digital 
ecosystem.

**Source** : [AI & Compute Infrastructure: Building ASEAN’s Digital Backbone](https://www.aseanexchanges.org/content/ai-compute-infrastructure-building-aseans-digital-backbone/?rand=138677)