With talent shortages, sweeping tariffs and geopolitical tensions intensifying, what can be the region’s decisive strategies to maintain global competitiveness?

The ASEAN manufacturing sector is at a critical juncture, teetering on the edge of unprecedented growth and formidable challenges, according to UNCTAD’s latest Global Investment Report.

This surge in investment is a testament to ASEAN’s magnetic appeal to global investors: yet, it also casts a spotlight on the pressing issues that could impede its progress.

At the heart of these challenges are quality assurance, manpower shortages, and cost efficiency.

As the region grapples with these obstacles, the call for automation has never been louder or more urgent. Experts contend that automation is not merely an option but a crucial strategy by which to transcend barriers and cement the region’s status as a global manufacturing powerhouse.

Talent shortages: a growing gap

Nowhere is the need for change more apparent than in Vietnam, where realized foreign direct investments FDI reached US$14.15b in the first eight months of 2024, with nearly 80% funneled into manufacturing. Despite this growth, a severe shortage of skilled workers looms.

This trend is not limited to Vietnam’s industries. Across ASEAN’s six largest economies (Indonesia, Thailand, Malaysia, the Philippines, Singapore, and Vietnam), the talent gap is projected to hit 6.6m skilled workers this year.

The talent scarcity has pushed firms into a “talent tug-of-war,” destabilizing production lines as newer factories poach experienced workers from established ones.

For instance, in Thailand, the automotive sector has been particularly affected, with companies such as Toyota and Honda struggling to maintain production schedules due to labor shortages.

Automation as a competitive advantage

As global competition intensifies, ASEAN manufacturers will need to prioritize consistent quality. Yet, reliance on manual processes often leads to variability, product defects, and customer dissatisfaction.

Automation solves these issues by ensuring precision, uniformity, and efficiency. For example:

  • Advanced sensor technologies can allow less experienced workers to perform complex tasks accurately, addressing the expertise shortage while maintaining high production standards.
  • In Malaysia, highly established big-name electronics manufacturers have successfully integrated automated quality control systems, significantly reducing defect rates and improving product reliability. Automation also reduces waste and downtime, making it a key driver for cost efficiency.
  • Some adopters of automation in manufacturing have reported up to 30% improvements in efficiency and a 50% reduction in product defects. These gains underscore the transformative potential of automation in enhancing both quality and efficiency in manufacturing processes.

Strategies for overcoming resistance to change

Despite its benefits, automation adoption remains sluggish among small- and medium- sized enterprises (SMEs), often due to cost concerns.

A phased approach: “Start Small, Scale Fast” can be applied to help stakeholders overcome these barriers. For instance:

  • A pharmaceutical company in Indonesia struggling with high error rates in packaging byimplementing automated quality management systems in targeted production areas. Once the initial investment proves its value, the company can scale automation efforts across other operations. This approach has been successfully demonstrated by other firms that had began with small-scale automation projects and gradually expanded them, resulting in significant
  • Canvassing government support is vital Singapore’s industrial parks, such as Jurong Island, provide a blueprint for a national-level stake in fostering technology adoption. By creating integrated ecosystems and offering financial incentives, governments can help manufacturers modernize and remain competitive. Automation emerges as a practical solution to this pressing challenge.
  • Learning from the transformation journeys of other regions,, such as South Korean manufacturing giants such as Samsung and LG is important. Such companies transitioned from cost-focused operations to global innovation leaders through sustained investments in quality, innovation, and automation. This shift has allowed them to command premium prices for their superior products.
  • Moving beyond competing on cost alone is another imperative for ASEAN manufacturers. Automation and smart factory technologies are no longer aspirational; they are essential for survival in a rapidly evolving industry.

The ASEAN manufacturing sector has the potential to become a global powerhouse, but this will require bold investments in automation and innovation. Manufacturers that act now will not only overcome current challenges but also position themselves for long-term success.

By starting small, scaling fast, and leveraging government support, ASEAN can transform today’s pain points into opportunities for growth and technological leadership.