AI is redrawing Asia's trade map, with South Korea, Taiwan, China, and ASEAN forming a new hardware supply chain triangle

Overview

This report discusses how AI is reshaping Asia's trade landscape. Its core judgment is that AI is not merely driving higher trade volumes, but is reorganizing regional production networks: a tighter hardware supply-chain triangle is emerging among South Korea, Taiwan, China, and ASEAN, while nodes such as Singapore, Hong Kong, China, and Mexico are taking on roles as high-value electronics hubs, re-export channels, and nearshoring assembly gateways, respectively. Asia is evolving further from the global center of AI hardware supply into a center of AI demand and data center investment.

Core views

The report argues that Asia's position in AI-enabled goods is becoming more entrenched, especially in intermediate inputs, equipment, advanced packaging, high-bandwidth memory, and back-end semiconductor services. Taiwan, China, remains the key net exporter in advanced chips and the AI server supply chain, but its trade orientation is shifting further away from Mainland China toward the United States, ASEAN, and Mexico; South Korea is benefiting from HBM and memory-chip demand, strengthening exports to Taiwan, China, Mainland China, and ASEAN; ASEAN, through Singapore, Vietnam, Malaysia, Thailand, and the Philippines, is taking on testing, packaging, assembly, and electronics manufacturing functions.

Analysis framework

Based on the WTO definition of AI-enabled goods, the report combines ITC Trade Map data, bilateral trade data, export categories, trade balances, and regional investment data to compare structural changes from 2015 to 2025, with a focus on the trade acceleration seen in the first quarter of 2026 and from January to May. The analytical framework spans five dimensions: product categories, country shares, bilateral corridors, re-export routes, and the diffusion of end demand.

Methodology notes

• Trade classificationWTO AI-enabled goods basket

  105 HS 6-digit product codes

  The report uses the WTO definition of AI-enabled goods, dividing 105 HS 6-digit products into three categories: raw materials and processed chemicals, intermediate inputs, and equipment; the list is not exhaustive, and some products are not used exclusively in the AI value chain.

• Data sourceITC Trade Map and HSBC estimates

  Trade value, market share, and bilateral flows

  Unless otherwise specified, trade values are sourced from ITC Trade Map and calculated by HSBC to measure the share and growth of AI-related goods in Asian and global trade.

• Supply-chain analysisRegional trade corridor framework

  South Korea-Taiwan, China-ASEAN triangle, Hong Kong, China re-exports, Mexico nearshoring channel

  The report identifies new pathways in the AI hardware supply chain through bilateral trade flows, investment, and product categories, emphasizing the shift from point-based manufacturing to multidirectional regional specialization.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Taiwan, China AI hardware supply chain

  Core export and advanced-packaging node

  Strengths

  Has advanced chips, AI server-related inputs, and advanced-packaging capabilities such as TSMC, with rising export importance to the United States and ASEAN.

  Weaknesses

  Highly sensitive to external AI demand and geopolitical policy, with historic shifts in its trade balance with Mainland China.

  Comparison

  Compared with 2015, Taiwan, China has significantly increased its share of both intermediate-input and equipment trade, and continued to benefit from AI server demand around 2025.

  Risks

  Pullback in front-loaded procurement, changes in US export controls, inventory normalization, and chip-price volatility.

• South Korea memory and HBM chain

  Key supplier of inputs for AI training and accelerator hardware

  Strengths

  Strong demand for HBM and memory chips, with stronger exports to Taiwan, China, Mainland China, and ASEAN; SK Hynix and Samsung Electronics are complementary with TSMC.

  Weaknesses

  Highly dependent on the memory price cycle and a small number of high-end customer chains.

  Comparison

  South Korea surpassed Taiwan, China in 2026 to become Asia's fastest-growing exporter of AI-enabled goods.

  Risks

  Rising memory self-sufficiency in Mainland China, price declines, and order volatility after front-loaded procurement.

• ASEAN semiconductor and electronics manufacturing base

  Mid- and back-end manufacturing, assembly, testing, and regional specialization receiver

  Strengths

  Singapore, Vietnam, Malaysia, Thailand, and the Philippines each play roles in high-value electronics, end-product assembly, packaging and testing, and components, absorbing inputs from South Korea and Taiwan, China.

  Weaknesses

  Some segments still depend on external supply of high-end chips, equipment, and parent-company support.

  Comparison

  Compared with the traditional China-centered chain, ASEAN has become a more important regional manufacturing network under the China-plus-one strategy.

  Risks

  Capacity absorption, policy changes, infrastructure bottlenecks, and slower external demand.

• Singapore AI and electronics hub

  ASEAN's high-value semiconductor, data center, and technology control tower

  Strengths

  Has wafer manufacturing, IC design and testing, equipment, R&D foundations, and corporate presence including Micron, and hosts about half of Southeast Asia's data center capacity.

  Weaknesses

  Data center capacity is gradually spilling over to nearby regions such as Johor, and local space and energy constraints may limit expansion.

  Comparison

  Compared with other ASEAN economies, Singapore is more of a high-value-added control tower and technology hub than a pure assembly base.

  Risks

  Capacity limits, regional competition, energy constraints, and fluctuations in global technology demand.

• Mainland China semiconductor demand and import substitution

  Demand side for high-end chips, exporter of mature-node chips, and promoter of self-sufficiency

  Strengths

  AI capability buildout and data center investment are driving import demand for memory, equipment, and high-end chips, while exports of mature-node chips are also strengthening.

  Weaknesses

  There is still dependence on high-end logic, HBM, and advanced equipment, and the semiconductor trade deficit remains large.

  Comparison

  Unlike the contraction of the past few years, both imports and exports have accelerated since 2025, but rising prices for high-end imports have widened the deficit.

  Risks

  Technology restrictions, export controls, uncertain progress in import substitution, and limited access to advanced equipment.

• Japan semiconductor materials and equipment

  Key upstream supplier for AI hardware

  Strengths

  Has irreplaceable strengths in advanced materials, silicon wafers, chemicals, precision equipment, power devices, image sensors, and automotive microcontrollers.

  Weaknesses

  Sensitive to export restrictions on advanced equipment and the regional capital expenditure cycle.

  Comparison

  Equipment exports to ASEAN and South Korea have risen, while semiconductor machinery exports to China fell 12% year on year in 2025.

  Risks

  Export licensing restrictions, downstream capex volatility, and supply-chain geopoliticization.

Key data

• Scale of Asia's AI-enabled tradeApproached USD 2 trillion in 2025Roughly doubled from pre-pandemic levels, with intermediate inputs accounting for about 83%.
• Asia's share of global AI trade62% in 2015, 69% in 2025The share gain was mainly driven by deeper intra-Asian supply chains.
• Composition of AI-enabled tradeIntermediate inputs 73%, equipment 26%, raw materials and processed chemicals 1%On a 2025 basis, indicating that strategic weight is concentrated mainly in downstream and midstream hardware chains.
• Non-China Asia share of intermediate inputs46.2% in 2015, 55.2% in 2025Up 9 percentage points, reflecting China-plus-one and dual-supply-chain strategies.
• Non-China Asia share of equipment trade23% in 2015, 42.9% in 2025Equipment export bases have become more diversified.
• Taiwan, China share of intermediate inputs7.2% in 2015, 13.5% in 2025Taiwan, China has strengthened significantly in AI hardware intermediate-input segments.
• Vietnam's share of equipment trade1.2% in 2015, 12.4% in 2025The largest increase among individual economies in the table.
• AI as a share of Asia's exportsAbout 35%The report says AI now accounts for about 35% of Asia's total export value.
• Trade in AI-enabled goods between Taiwan, China and ASEANUSD 47.4 billion in the first quarter of 2026, up 77% year on yearPreviously rose 26% in 2024 and 51% in 2025.
• Growth in Taiwan, China's exports to SingaporeUp 160% year on year in the three months to May 2026Taiwan, China became Singapore's largest trading partner in 2025.
• Taiwan, China's manufacturing FDI into SingaporeAnnual average of USD 1.45 billion in 2021-2025Compared with an annual average of USD 115 million in 2016-2020, an increase of more than tenfold.
• Growth in Taiwan, China's imports from VietnamUp 173% year on year in the three months to May 2026More than 95% of the increase came from machinery, electrical equipment, and appliances.
• South Korea's trade balance with Taiwan, ChinaUSD 4.2 billion deficit in 2023, USD 16.7 billion surplus in 2025Reflects the complementary South Korea-Taiwan, China relationship under the HBM and advanced-packaging chain.
• South Korea's trade balance with Mainland ChinaUSD 5.8 billion deficit in the first five months of 2025, USD 9.9 billion surplus in the same period of 2026Driven by demand for semiconductors and memory chips.
• South Korea's exports to ASEANUp 46% year on year from January to May 2026Shows South Korean memory and system components entering ASEAN's mid- and back-end manufacturing chain.
• Singapore electronic NODXUp 66.7% year on year in April 2026Driven by disk media, integrated circuits, and personal computers.
• China's imports of electronic integrated circuitsUSD 425 billion in 2025Higher than crude oil imports of USD 295 billion, accounting for about 17% of China's total imports of USD 2.58 trillion.
• China's chip trade deficitUSD 99.3 billion from January to May 2026, up 20% year on yearImport values were driven by rising prices for memory and other products, marking the largest same-period level since 2022.

Impact & implications

The investment and macro implications are that the AI hardware upcycle is binding together intra-Asian trade, semiconductor capital expenditure, data center construction, and supply-chain diversification. The most direct beneficiaries are economies with capabilities in memory, advanced packaging, wafer foundry, testing and packaging, electronics assembly, semiconductor equipment, and data center infrastructure; at the same time, changes in trade flows imply that US demand may be remeasured through routes such as Mexico, ASEAN, and Hong Kong, China, meaning that looking only at direct export destinations may underestimate real end demand.

Risks

• Front-loaded inventory procurement may unwind in subsequent quarters, causing trade growth to slow.
• Rising chip and electronics prices may feed through into inflation.
• Mainland China's accelerated buildout of HBM, NAND, and domestic semiconductor capabilities may weaken South Korea's memory export advantage over the medium term.
• US and allied export controls may continue to alter the flow of high-end chips and equipment among Taiwan, China, South Korea, Japan, and Mainland China.
• AI demand remains concentrated in the US and China; if hyperscaler cloud capex slows, Asia's hardware chain could come under pressure.
• Data center expansion faces constraints in power, land, cooling, regulation, and cross-border infrastructure.

What to watch

• Whether growth in AI-enabled goods trade slows after inventory normalization in the second half of 2026.
• Changes in the volume and price of South Korea's HBM and memory-chip exports, especially flows to Taiwan, China, Mainland China, and ASEAN.
• Changes in Taiwan, China's export shares to ASEAN, Mexico, and the United States, and whether its trade balance with Mainland China continues to weaken.
• New investment in data centers, packaging and testing, and electronics assembly in Singapore, Malaysia, and Vietnam.
• Progress in Mainland China's domestic memory and semiconductor equipment capability buildout, and the speed of substitution for imported high-end chips.
• Changes in Japan's semiconductor equipment exports to ASEAN, South Korea, and Mainland China.
• The impact of rising chip prices on regional inflation, corporate margins, and capex plans.