Apple, Microsoft, and Nvidia are investing billions of dollars in Southeast Asia.The reason is as follows

The CEOs of Apple Inc., Microsoft Inc. and Nvidia Inc. have been touring the region over the past few months, pledging billions of dollars in investments and working with heads of state from Indonesia to Malaysia. He is one of the top in the industry. Amazon.com took over a huge conference hall in downtown Singapore this week to announce a $9 billion investment plan in front of an audience of several thousand cheering and waving psyllium lights.

The region of about 675 million people has been second-tier to China and Japan for decades, but is attracting more technology investment than ever before. In data centers alone, the world’s biggest companies are set to splurge up to $60 billion over the next few years as young people in Southeast Asia embrace video streaming, online shopping and generative AI.

The moment for the region, which has traditionally welcomed Western investment, comes as China grows increasingly hostile to U.S. companies and India remains under political control. Silicon Valley has its sights set on business-friendly institutions, a rapidly growing talent pool, and rising incomes. With the advent of AI, technology leaders are pursuing new sources of growth and building the region’s future digital infrastructure.

“Countries like Singapore and Malaysia are largely neutral to the geopolitical tensions that are happening with China, the United States, Ukraine and Russia,” he said. said Sean Lim, managing partner of NWD Holdings, which is investing in the sector. The area is becoming more attractive, especially as the war continues. ”

Take Tim Cook and Satya Nadella, for example. Last month, they embarked on their biggest tour across Southeast Asia in years. The investments they have promised will help turn the region into a major battleground between Amazon, Microsoft, Google and others on future frontiers such as artificial intelligence and the cloud.

The region’s growing workforce has made it a viable alternative to China as a hub for talent to support companies’ global operations. The government’s push to improve education and infrastructure has made it an attractive hub for everything from manufacturing and data centers to research and design.

“Governments are active in cross-border investment and there is a wealth of talent available,” said NWD’s Lim.

Southeast Asia is also a big market for gadgets and online services. As purchasing power increases, around 65% of Southeast Asians will be in the middle class by 2030, according to Singapore government estimates. This will more than double the region’s internet-based services market to $600 billion, according to estimates from Google, Temasek Holdings and Bain & Company.

Apple, whose expensive devices have long been out of reach for most people in the region, is now adding stores. In late April, CEO Cook visited Vietnam, Indonesia, and Singapore, and while seeking new growth regions outside of China, where sales are sluggish, he met with prime ministers and others to discuss new investments. announced.

In Jakarta, in addition to a powwow with the country’s leaders, Cook ate chicken satay and met with a local influencer with about 800,000 followers on Instagram, saying in a video that went viral on social media: “I’m fine. I learned so much of the local language that I could say, “What?” The X account said that after the trip, local customers asked Cook for the opening of an Apple Store and better service for Apple products in the country, and revenue in Indonesia has increased in the past year, despite a decline in global sales. reported to have reached its peak.

“These are markets where our market share is low,” Cook said on a conference call last week. “The population is large and growing. And our products are really making great strides.” .

Microsoft CEO Nadella also received a warm welcome after meeting with the leaders of Malaysia, Indonesia and Thailand last week. In Bangkok, he was seen shaking hands and conversing with government officials and the country’s top business elite under the glittering chandeliers of a ballroom.

Given the slowdown in Silicon Valley’s sales, the appeal of Southeast Asia becomes clear. Silicon Valley is currently struggling to lay the groundwork for AI, which is expected to become an industry-defining technology. In the coming weeks, his two major AI-themed events will be held in Singapore, featuring top leaders from OpenAI, Anthropic, Microsoft, and more, to further promote the technology’s potential in Southeast Asia. .

A concrete catalyst for technology companies is generative AI, with services like ChatGPT rapidly gaining users. A report from consulting firm Kearney says the accelerated adoption of AI in Southeast Asia could add about $1 trillion to the region’s economy by 2030.

This means more data centers are needed to store and process the large amounts of information that is exchanged between content creators, businesses, and customers. Data center demand in Southeast Asia and North Asia is expected to grow approximately 25% annually through 2028, according to Cushman & Wakefield data. This compares to 14% per year in the US. By 2028, Southeast Asia will become the world’s second largest source of data center revenue outside the US.

Hotspots include Malaysia’s southern Johor Bahru region, where Nvidia partnered with a local power company last year to build a $4.3 billion AI data center park. Nvidia is also targeting Vietnam, which CEO Jensen Huang believes could become the company’s second home, local media reported during a visit in December. Wearing a black T-shirt and jeans, Mr. Huang was seen hanging out with local technology workers, enjoying street food and Vietnamese specialty egg coffee.

The company has since considered Hanoi, Ho Chi Minh City and Da Nang as potential investment locations, with Keith Strie, vice president of Worldwide AI Initiatives, touring the cities last month.

Consisting of about a dozen politically, culturally and geographically distinct countries, Southeast Asia is not the easiest market for global companies to operate in. Risks include difficulties adapting to local work culture and fluctuations in various currencies, NWD said. rim.

But for now, tech giants are embracing the region’s advantages, including relatively low costs and a highly skilled workforce. This helps build expensive technologies such as large language models that require not only large amounts of cash but also skilled engineers. Most US companies have announced training programs with local governments, and Microsoft has pledged to train a total of 2.5 million people in AI skills in Southeast Asia by 2025.

“This change is influenced by both external and internal factors,” said Nicholas Lee, associate director at political consultancy Global Counsel’s Singapore office. “In addition to policy differences, slowing revenue growth and rising costs are also contributing factors.” Emphasizes the need for businesses to carefully manage expenses. ”