Southeast Asia Manufacturing Industry Growth to Drive Regional Software Solutions and Professional Services Spend to US$29.5 Billion by 2031

The Southeast Asia (SEA) region boasts a burgeoning manufacturing market, with countries witnessing robust growth in Manufacturing Value Add (MVA). For instance, Indonesia's MVA surged from over US$206 billion in 2020 to exceeding US$230 billion by 2023. According to ABI Research, a global technology intelligence firm, spending on manufacturing software solutions and services is projected to soar from US$9.3 billion in 2024 to US$29.5 billion by 2031, marking an impressive CAGR of 18%. This growth trajectory presents substantial opportunities for manufacturing software solution providers looking to capitalize on the expanding SEA market.

“Southeast Asia continues to represent a thriving hub for manufacturing, offering lucrative opportunities for enterprises looking to move into the region,” says Matthias Foo, Senior Analyst at ABI Research. “This trend is likely to persist in the coming years, especially as countries, such as Thailand, register record investment numbers in 2024, covering industrial verticals including electronics and electrical appliances, automotive, food production, and petrochemical and chemical industries.”

The strong growth is also driven by positive government initiatives, such as Thailand’s Eastern Economic Corridor and Vietnam’s various economic zones. Both offer corporate tax incentives to investors, a key driving factor. Additionally, competitive labor costs, political stability, and rapidly growing economies are also notable strengths of the Southeast Asian region.

Despite the overall growth, manufacturers in the region face new challenges, such as the increasing input costs of raw materials, rising labor costs, and strong competition from other major manufacturing nations like China. As a result, manufacturers within SEA, particularly Small and Medium Enterprises (SMEs), are experiencing a squeeze in profit margins and face issues maintaining their existing business models. Digitalization is increasingly seen as an important factor in improving productivity, decreasing costs, and increasing competitiveness.

Among the various factors, cloud technology stood out as one of the critical capabilities that could transform the regional manufacturing market. In particular, cloud-based Subscription-as-a-Service (SaaS) models are expected to boost the adoption of digital solutions, especially among SMEs. “Although growing, cloud adoption across the region remains low, with on-premises deployments continuing to make up most of software revenue. Nonetheless, there is a large growth potential here as SEA nations draw up aggressive fiber rollout plans, such as Malaysia’s JENDELA initiative and Thailand’s Giga Thailand 2023 plans. These national initiatives are expected to improve connectivity and support adopting cloud-based solutions,” concludes Jake Saunders, Vice President of Asia Pacific and Research Director for ABI Research’s Southeast Asia Digital Transformation research service.

These findings are from ABI Research’s Manufacturing Software Revenue in Southeast Asia market data report. This report is part of the company’s Southeast Asia Digital Transformation and Industrial & Manufacturing Markets research services, which includes research, data, and ABI Insights.