Thailand and Malaysia: The AI supply chain's hidden beneficiaries

Ko Young-kyung

The author is a research professor at Yonsei University’s Digital Trade Research Center.

In its July update to the World Economic Outlook, the International Monetary Fund (IMF) identified Taiwan, Korea, Thailand and Malaysia as the world’s four leading net exporters of AI hardware. The average first quarter growth rate of these four economies exceeded earlier forecasts by 4.4 percentage points; the rate for the rest of the world was, on average, 0.3 percentage points below expectations.

Korea and Taiwan are globally recognized semiconductor powerhouses, so their inclusion is hardly surprising. Thailand’s and Malaysia’s, however, may be more unexpected, but the geography of their respective AI supply chain looks quite different from the convention.

The IMF’s definition of AI hardware extends well beyond processors and memory chips to include computer and server components, semiconductor manufacturing equipment, storage devices and electronic assemblies. Thailand manufactures servers, storage systems, printed circuit boards and power equipment and is also the world’s second-largest exporter of hard disk drives, supplying approximately 17 percent of global output. This position is the result of a manufacturing cluster that has developed over more than four decades since Seagate Technology established operations in the country in 1983. Thailand is also the world’s 11th largest exporter of computers. 

Malaysia, meanwhile, accounts for approximately 13 percent of global semiconductor back-end manufacturing, including assembly, packaging and testing. Its integrated circuit exports are roughly half of Taiwan’s and about two-thirds the size of Korea’s. Historically, these activities have been regarded as relatively low-value-added processes and have therefore attracted less attention than their scale would suggest.

The rapid expansion of investment in AI infrastructure has begun to transform the industry’s standing. Thailand’s Electronics Index has risen 46 percent on year and surged as much as 96 percent at one point. Over the same period, the country’s benchmark stock index gained 27 percent while the telecommunications sector advanced only 16 percent. Delta Electronics, a leading supplier of power and cooling equipment for data centers, has been the principal driver of the index’s performance, and Stars Microelectronics has emerged as the market’s hottest stock, with its share price soaring 386 percent this year.

Malaysia’s Technology Index has also climbed 45 percent on year compared to a gain of just 3.1 percent for the broader market. ViTrox has risen 115 percent, and Inari Amertron and Malaysian Pacific Industries have gained 27 percent and 50 percent, respectively.

These companies have largely moved in tandem with global AI-related stocks. On July 29, following SK hynix’s earnings announcement, its share price declined, and Thailand’s Electronics Index fell 7 percent as well. The following day, after Microsoft reported earnings, both rebounded together. Although they have generally moved in the same direction, the Southeast Asian markets have exhibited significantly lower volatility. While Korea’s Kospi fell 32 percent from its peak, the declines in Thailand and Malaysia amounted to less than half that magnitude.

There are, of course, important limitations. Thailand’s Electronics Index comprises only seven constituent stocks, with nearly two-thirds of trading value concentrated in Delta Electronics, the market’s largest company by capitalization, which is itself a subsidiary of a Taiwanese firm. In Malaysia, exports also rely heavily on local manufacturing facilities operated by multinational firms such as Intel and Infineon Technologies while domestic companies remain relatively small.

Even so, one conclusion is clear: The beneficiaries of the AI hardware boom extend well beyond Korea’s semiconductor industry. Thailand and Malaysia have already established themselves as important manufacturing hubs within the global AI supply chain.