Article | Evolving Workforces

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific

February 6, 2024


Despite the continued global drive towards nearshoring and supply chain diversification, Asia Pacific remains a choice manufacturing destination. According to S&P Global1, Asia Pacific’s manufacturing outlook remains bright, driven by the recovery in the electronics exports sector and sustained growth in semiconductors and renewable energy sectors.

Currently accounting for approximately 48.5% of the global manufacturing output2, companies continue to expand their manufacturing footprint in Asia Pacific, drawn to the region’s abundant talent supply, cost competitiveness and compelling investment incentives promised by governments that have earmarked advanced manufacturing as a key economic growth engine and are eager to attract foreign direct investment (FDI) into the sector.

As a result, the overall level of employment in the manufacturing industry in Asia Pacific has risen over the last five years and is expected to continue on an upward trend in line with the sector’s anticipated growth.

Figure 1. Total manufacturing employment in Asia Pacific (2018 – 2023, in thousands)

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific-Figure-1
Note: 2021 employment numbers were used for China as 2022 employment statistics were not published.
Source: CBRE Asia Pacific Consulting, National Statistics (2018-2023)

(Click to enlarge)

What is advanced manufacturing?

Advanced manufacturing leverages innovative technologies to optimise all elements of the production value chain and enhance operational resilience and adaptability, improving a company’s competitiveness, productivity and efficiency. Advanced manufacturing operations are a key part of several important industries such as renewable energy, electric vehicles (EVs), batteries and semiconductors.

Figure 2. Drivers of advanced manufacturing activity

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific-Figure-2
Source: CBRE Asia Pacific Consulting

(Click to enlarge)

What is the manufacturing talent skills gap?

One of the primary obstacles threatening the long-term success of advanced manufacturing in Asia Pacific is the continued availability of talent with the right qualifications and technical experience to meet the increasing demand.

Record-low unemployment rates seen in 2023 in most Asia Pacific countries will only further exacerbate this challenge. Though some countries, such as Vietnam, Singapore and New Zealand, did see marginal increases in unemployment (implying more availability of labour), significantly higher declines in countries such as Australia, India and Philippines indicate a highly competitive market for skilled talent for the region as a whole.

Figure 3. Unemployment rate in Asia Pacific (2018 vs. 2023, %)
Figure 4. Percentage change in unemployment rate in Asia Pacific (2018 vs 2023)

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific-Figure-3-and-4

Source: CBRE Asia Pacific Consulting, International Monetary Fund (IMF) 20243, MOSPI (2022 – 2023)4

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What is causing the skills gap and how can we solve it?

The diversity of Asia Pacific economies and their varying levels of development means the distribution of skilled talent is unequal, a factor that companies must consider when selecting a suitable base for advanced manufacturing.

For instance, while South Korea and Japan are renowned for their advanced manufacturing capabilities, countries such as China, India, Vietnam and Thailand are better known for their strengths in volume-driven, low-cost production.

Even as governments take steps to attract more investments in advanced manufacturing, there exists a significant talent supply gap, particularly in countries that are making a transition from low-cost to advanced manufacturing.

Inadequate education and training is a key contributing factor to the industry’s skills gap, especially as rapid technological change outpaces the ability of education and training systems in the region to keep up.

One way companies can measure their exposure to risks posed by a skills shortage is to compare the supply of talent to the demand for the same skill sets. This ratio is derived by taking the total pool of qualified talent in a market divided by the number of unique job postings (demand).

As shown in Figure 5, which identifies five representative positions in the advanced manufacturing space across Asia Pacific by matching each job family to common job titles many operations hire for, companies face the greatest risk in hiring automation engineers.

Figure 5. Which manufacturing jobs are hardest to hire?

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific-Figure-5
Source: CBRE Asia Pacific Consulting, LinkedIn Talent Insights 2024
*Note: The hiring risk is measured by the ratio of the talent pool compared to the total unique job postings. A lower hiring risk value represents higher risk (i.e. more challenging) when hiring in the job family.

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Which geographies are winning advanced manufacturing sector investments?

With business friendliness, lower labour costs and the continued availability of suitable talent being key criteria for selecting an advanced manufacturing base, companies are assessing each country’s strengths and economic priorities to guide their decisions to invest in these markets, as CBRE’s data indicates. Using a sample of representative advanced manufacturing sectors, the top countries in Asia Pacific by announced new FDI investments for selected advanced manufacturing sectors have been identified.

Figure 6. Top 4 investment destinations for each sector (2018 – 2023)

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific-Figure-6
Source: CBRE Asia Pacific Consulting, FDIMarkets 2023

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Most countries have set ambitious GDP contribution targets for their manufacturing sector. China, for instance aspires to become an advanced manufacturing nation by 2035 while India expects 25% of GDP to come from the manufacturing sector by 20255. Meanwhile, Vietnam aims to generate 30% of its GDP from manufacturing activities by 20306.

Nearly all countries in the region have created compelling narratives to attract investment, from highlighting the benefits of supply chain diversification to offering incentives and creating favourable labour and real estate conditions, among others.

These efforts have resulted in significant cross-border investments. Noteworthy examples include investments in semiconductor manufacturing by Foxconn and Micron in India7 and Samsung’s USD850 million dollar investment in Vietnam8. Thailand’s dominance as an automotive manufacturing hub and growing emphasis on EV manufacturing has helped it draw investment from BYD and Great Wall Motor9 while Australia’s renewable energy sector leads by a large margin – in terms of attracting cross-border funds – within the Asia Pacific region thanks to the country’s readily available supply of renewable energy resources.

Overall, in the Asia Pacific region, the renewable energy sector has attracted the most advanced manufacturing-related investments, accounting for approximately 47% of the total FDI investment. This is followed by semiconductors (approx. 35%) and EVs (approx. 18%). With the region poised to emerge as a leader in the smart manufacturing race, the industry’s share of investments is expected to grow further.

Figure 7. Proportion of FDI Investments in Asia Pacific

A Roadmap to the Future of Advanced Manufacturing in Asia Pacific-Figure-7
Source: CBRE Asia Pacific Consulting, FDIMarkets 2023

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What incentive strategies are most compelling for advanced manufacturing projects?

Discretionary cash grants are the most attractive incentives for large-scale advanced manufacturing projects. This is essentially a sum of cash provided by a national or state government for companies to use for specific activities.

Most discretionary cash grants have associated “clawbacks” to ensure the company meets economic impact thresholds as described in the incentive negotiation process. Typically, incentives can vary by sector and the economic development status of each country or state. Other favourable incentive offerings include infrastructure cost offsets, R&D incentives and property tax abatements.

What are the potential challenges for advanced manufacturing?

As advanced manufacturing activity continues to accelerate in Asia Pacific, CBRE’s Asia Pacific Location Strategy sees three primary challenges for the industry:

  1. Infrastructure and Utility Scarcity – If all planned and announced projects come online at the full projected capacity across the region, there could be power and water shortages with certain geographies more vulnerable than others. However, tech advancements can help streamline production capabilities so capacity is optimally calibrated to meet demand fluctuations and thereby mitigate challenges such as power and water shortages.
  2. Climate Change and Location Desirability – Decisions made today regarding large-scale, capital-intensive operations will see their impact play out over the next 30-odd years. As climate change threatens to change the way we live, locations that are not vulnerable today may be exposed to heightened risk in the near term.
  3. Talent and Real Estate – The skills gap previously described in this article is a significant challenge that the industry will have to address. In addition, while most countries offer a strong suite of real estate industrial parks as well as greenfield or brownfield options, finding suitable real estate can be challenging given the complex requirements for setting up advanced manufacturing facilities.

How can APAC economies continue to grow their advanced manufacturing capabilities?

The advanced manufacturing industry will continue to grow in the coming years and redefine how we think about manufacturing around the world. Current challenges notwithstanding, the Asia Pacific region remains better placed than other economies to build on its strengths and continue succeeding in the industry, due to factors such as lower costs and business-friendly policies.

However, equally important is the region-wide availability of production and manufacturing talent to support the industry’s growth. Furthermore, in today’s highly competitive talent environment, the tradeoffs that comprise every site selection and location decision become even more important to ensure the long-term success of the industry. Decisions regarding location should therefore be arrived at through a data-driven process, which can limit risk by comprehensively considering all the potential factors that can ultimately aid the setting up of a successful operation.

About CBRE Asia Pacific Consulting

CBRE’s Asia Pacific Consulting practice helps clients with complex location strategy decisions that take into account a myriad of important location factors, such as workforce strategies, locational profiling and site selections.


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