ASEAN's Manufacturing Shift Is Accelerating — and the Chemicals Sector Is a Quiet Beneficiary
Manufacturing activity continues to shift across ASEAN — Vietnam, Thailand, Indonesia, and Malaysia absorbing production capacity that companies are relocating from China in response to tariff costs, logistics complexity, and supply chain concentration risk management. This shift has been discussed as a geopolitical and trade policy phenomenon since 2018, when the initial U.S.-China tariff escalation created the first material financial incentive for manufacturer relocation. What is different in 2026 is the pace and commitment depth of the relocation: companies are no longer hedging between China and ASEAN locations but committing capital at the scale required for full production transfer, not just capacity duplication.
The chemicals sector sits at an interesting intersection of this manufacturing relocation wave. Chemical companies both supply to the manufacturing sector that is relocating — providing industrial chemicals, process chemicals, coatings, adhesives, and specialty materials to factories wherever they operate — and are themselves subjects of the relocation decision when they are manufacturers rather than pure suppliers. The dual role creates a commercial dynamic where chemicals companies must simultaneously follow their manufacturing customers to ASEAN markets to maintain supply relationships, and assess whether their own production facilities face the same relocation economics that are driving their customers' decisions.
Why Vietnam and Thailand Are Winning the Relocation Competition
Vietnam and Thailand have emerged as the primary beneficiaries of the ASEAN manufacturing relocation wave for reasons that are structural rather than merely incentive-driven. Vietnam's combination of young demographics, rising industrial workforce skill levels, improving logistics infrastructure, and established manufacturing relationships with electronics, textiles, and consumer goods sectors — developed over a decade of gradual capacity building — provides a manufacturing foundation that new entrants can leverage rather than build from zero. The country's proximity to Chinese supply chains for components and raw materials reduces the supply chain disruption associated with production relocation, allowing manufacturers to relocate assembly and finishing operations while maintaining upstream supplier relationships that are not yet ready for parallel relocation.
Thailand's attractiveness derives from different structural advantages: a more developed industrial chemical and specialty materials sector, stronger technical workforce depth in precision manufacturing and automotive components, and established automotive and electronics industrial clusters in the Eastern Economic Corridor that provide the infrastructure and supplier ecosystem density that complex manufacturing requires. The EEC — which spans Chachoengsao, Chonburi, and Rayong provinces — is adding chemical industry tenants at an above-historical rate in 2026 as both petrochemical companies expanding ASEAN supply chains and specialty chemical companies following automotive and electronics manufacturers relocating to Thailand from China seek EEC industrial estate positions.
The Chemicals Supply Chain Restructuring That Follows
When manufacturing relocates to ASEAN, the chemicals supply chain that serves that manufacturing must restructure simultaneously. Industrial gases — oxygen, nitrogen, argon, and hydrogen used in electronics manufacturing, metal fabrication, and food processing — must be produced or imported near the point of consumption because long-distance transport is economically prohibitive for most industrial gas volumes. This creates local production investment requirements for industrial gas companies including Air Liquide, Linde, and Air Products at every major ASEAN manufacturing cluster where relocation is occurring. The industrial gas market in Vietnam grew approximately 18% in 2025 and is forecast to grow at comparable rates through 2027 as the manufacturing base expands.
Specialty coatings and adhesives — used in electronics assembly, automotive manufacturing, and consumer goods production — face a more complex supply chain restructuring because the formulation expertise and application technology required for premium specialty coatings is concentrated in developed market manufacturers who must establish regional technical service capabilities alongside physical supply to maintain their product performance advantages in new production locations. The shift of electronics manufacturing from Guangdong and Jiangsu provinces in China to Vietnam's Binh Duong and Bac Ninh provinces is creating demand for the advanced flux materials, conformal coatings, and thermal interface materials used in PCB assembly and electronics finishing at Vietnamese production sites — demand that is being met through a combination of local distribution expansion and in-country formulation investment by specialty chemicals companies that have decided the volume justifies local presence rather than import-dependent distribution.
Trade Route Risk and the Strait of Hormuz Factor
The Strait of Hormuz closure that has driven global oil price volatility since February 2026 is also affecting the logistics economics of ASEAN manufacturing in ways that are not immediately obvious. Vietnam and Thailand import significant volumes of chemical feedstocks — particularly petrochemical derivatives, polymer resins, and specialty chemical intermediates — from Middle Eastern producers who ship through the Gulf. The effective closure of the Strait has disrupted these supply lines, increasing shipping costs and lead times for chemical inputs that ASEAN manufacturers depend on. The disruption is creating premium pricing opportunities for suppliers who can source equivalent chemical inputs from non-Gulf supply chains — US Gulf Coast producers, European suppliers, and North Asian exporters whose logistics routes do not depend on Hormuz transit.
The medium-term implication is that ASEAN manufacturers and their chemical suppliers will accelerate supply chain diversification away from Middle Eastern feedstock dependence — a structural change that the conflict has catalysed but that serves long-term supply security objectives independent of whether the Hormuz disruption resolves quickly. Companies that use the current disruption period to establish durable non-Gulf supply relationships will retain the supply security benefits of that diversification even after Hormuz normalises, creating a more resilient chemical input supply chain than the Gulf-dependent structure that preceded the conflict.
What This Means for Market Participants
Chemicals sector companies should treat the ASEAN manufacturing relocation not as a demand trend to track but as a geographic expansion imperative to act on. The window in which companies can establish preferential industrial estate positions, anchor customer supply agreements, and technical service capabilities in Vietnam and Thailand at reasonable capital costs is narrowing as the relocation wave progresses — early movers are establishing the customer relationships and local infrastructure that latecomers will find harder to replicate when the ASEAN manufacturing cluster is more developed and competitive dynamics are more established. For companies evaluating ASEAN chemicals market entry, the planning horizon should be 2027 capacity, not 2028 — the relocation pace in 2026 suggests that the initial manufacturing wave will have established its chemical supply relationships before companies with later planning cycles can complete their market entry processes.