Manufacturing is Moving to Southeast Asia, and Cobots are Helping to Retain it

Manufacturing is now filling a sizeable chunk of national Gross Domestic Product (GDP) for many countries within SEA. According to Boston Consulting Group (BCG), the manufacturing industry in the region could generate up to US$600 billion a year. And as the big players in the market start relocating their manufacturing, smaller players are following suit.

Destination: Southeast Asia

Resident countries of the region—such as Singapore, Malaysia, Thailand, and Vietnam, are all open to international trade. This is a huge plus for foreign manufacturers, as most countries within the region have free trade agreements signed with partners including the EU, Australia, Japan, and South Korea.

SEA is famous for its rapid economic growth, low labour costs, and commitment to trade, which are all traits foreign manufacturers are looking for. In addition to having  many lower-skilled workers in the region, skilled labour can also be found in Singapore, Malaysia and the Philippines, among others, giving businesses a variety of options for different manufacturing needs. This diversity in the talent pool will help foreign companies keep up with increasing demand across SEA.

Lastly, being situated within Asia, the region also holds a strategic advantage due to its proximity to China, the original manufacturing hub.

The Manufacturing Paradox

The influx of business through manufacturing should be celebrated by Southeast Asian countries, but problems have arisen from this injection.

For one, the younger generation entering the workforce has a strong opinion about manufacturing jobs: they are dull, dirty, and dangerous. Many are resistant to jobs that are technical and physically demanding, hence driving them away from even considering careers in the manufacturing sectors. In Malaysia, it was reported that local chipmakers were lacking some 15,000 workers and could not meet demand despite a global chip shortage in 2022. Despite high demand for their products, manufacturers are finding it tough to meet demand due a labour shortage stemming within the sector.

The Helping Hand of Cobots

In the bid to counter these issues, governments and manufacturers alike have turned to automation—with collaborative robots (cobots) being a popular choice to help with their manufacturing woes.

Various initiatives have been implemented to promote the integration of automation in SEA. One notable example is the Infocomm Media and Development Authority (IMDA) in Singapore, which focuses on digitalising small and medium-sized enterprises (SMEs) through industry-specific Industry Digital Plans (IDPs). These plans serve as a comprehensive roadmap, providing SMEs with step-by-step guidance on adopting digital technologies and offering relevant training for their employees at different stages of their careers.

Governments also have a crucial role to play in supporting SMEs by offering subsidies, tax incentives, regulatory guidance, and streamlining bureaucratic processes. In Thailand, for instance, the government provides SMEs with a 200% tax deduction when they invest in smart devices, digital services, robotics, and Internet of Things (IoT) devices through the Digital Economy Promotion Agency. Likewise, the Malaysian government unveiled the New Industrial Masterplan 2030 earlier in 2023, where it aims embrace technology and digitalisation to drive innovation, enhance productivity, and create new opportunities for economic growth. Local companies are encouraged to adopt advanced automation and robotics, with the goal being transforming 3,000 smart factories nationwide.

An example from the region

These avenues of support have resulted in an uptake in automation within the region. According to the International Federation of Robotics’ latest report, Singapore has seen a 68% increase of robot installations in 2022, with neighbours Malaysia also seeing an increase of 42%. Cobots have been a popular choice among manufacturers for their ability to work alongside human workers, providing an energy and space efficient form of automation that brings greater productivity and value for businesses.

For example, Seng Heng Engineering—a SEA manufacturer of fasteners, turnkey machining and corrosion resistant coating products, installed two UR10e cobots in the production line to automate the CNC and engraving processes. With a shortage of manpower, the highly intensive processes resulted in declining efficiency in the engraving processes. Following the deployment of the UR cobots, production output doubled at Seng Heng Engineering. Now, the cobots are working around the clock in tandem with human employees, freeing up humans from activities that were previously done manually.

With schemes within the region aimed at encouraging businesses to embrace automation and capitalise on its benefits, cobots are bound to help SEA retain the newfound injection of manufacturing. By providing practical guidance, financial incentives, and regulatory support, governments in SEA are fostering an environment that promotes the widespread adoption of automation technologies among manufacturers, ultimately driving economic growth and enhancing productivity in the region.

As more and more manufacturers embrace automation, the helping hand of cobots will enable SEA to continue growing as the manufacturing hub for the world.

Written by Ix Lee, Head of Sales, Southeast Asia and Oceania, Universal Robots

"We are still in the era of super-productivity. Manufacturers continue to seek solutions that could potentially skyrocket production output and efficiency. However, the role of automation and robots is transforming. Robots are no longer replacing human workers in production lines, instead, they are designed to complement the cognitive skills of humans and further open doors to a multitude of benefits. The main focus is to encourage the older generations in embracing automation and at the same time, empower the younger talents with necessary technical and soft skills."