New order: Asia builds resilience as the geopolitical map is remade

Since 1980, around 800 million Chinese citizens have been lifted out of extreme poverty. Infrastructure investment, industrialisation, and an agricultural revolution have been key elements behind the nation’s dramatic success.¹

Significantly, so, too, has a focus on manufacturing for export. In 2001, China joined the World Trade Organization and locked in long-term low-tariff access to Western markets, triggering a wave of multinational offshoring in the country. By 2010, China had overtaken the US as the world’s largest manufacturer.²

The global order that propelled decades of economic growth is reshaping

As China’s economic fortunes have risen, so, too, has its global standing, upending the decades-long world order that saw the US as the undisputed dominant power and Western governments as the rule-makers.

We are living in a time of flux. China’s political rise, its dominance in manufacturing, and its stranglehold on the processing of numerous critical minerals – combined with successive geopolitical shocks – have highlighted the vulnerability of global supply chains to potential coercion. In developed nations, calls to re-shore manufacturing or re-route supply chains via new trading relationships are threatening China’s role as the world’s leading manufacturer. At the same time, the US’s position at the head of a unipolar global order appears to be coming to an end – as it does, longstanding political alliances are breaking down, to be replaced by new, still-forming geopolitical blocs.

What does this mean for Asia? As governments around the world invest in domestic security, and multinationals look to shore up their supply chains, will the region see an exodus, or an influx of new manufacturing and services activity? The global order that propelled decades of economic growth is reshaping. Convention calls this a time of caution for investors. At Lombard Odier, however, we believe that as the world shifts, this is a time of new opportunity.

Increasingly, ‘Made in China’ is becoming ‘Made in Asia’

From ‘Made in China’ to ‘Made in Asia’

Trade tariffs have hit US-China trade hard – in 2025, around 30% of direct imports and exports between the two nations fell away³.

Yet, despite this and a proliferation of restrictive trade policies around the world⁴, the total value of global trade has continued to rise. Asia has been a major beneficiary, with ASEAN (the Association of Southeast Asian Nations) in particular standing out for strong trade growth, successfully expanding trade with every world region including with both the US and China⁵.

Increasingly, ‘Made in China’ is becoming ‘Made in Asia’. For instance, as China’s share of global apparel exports has slipped, Cambodia has grown from 3.3% to 4.3% of the clothes market, to join Vietnam and Bangladesh in eating into China’s lead.⁶

For many Asian nations, though, it is growing global demand for electronics, combined with a shift away from Chinese manufacturing, that is underpinning export growth. ASEAN economies replaced roughly two-thirds of the US laptop imports once supplied by China, as electronics products reached 45% of the bloc’s exports and 70% of export growth.⁷ More broadly, Asian nations now make up half of the world’s top ten high-tech exporters.⁸

Having everything in one location had too much risk

Supply chain diversification – the smartphone story

The story is perhaps best told by that ubiquitous symbol of the modern age – the smartphone. On the outskirts of the city of Chennai, in the southernmost Indian state of Tamil Nadu, stands a huge new factory. Spanning 160 acres, and employing 40,000 people, the Foxconn factory – built to supply Apple – is the first major iPhone manufacturing centre in the country.⁹ It is also a concrete symbol of the economic shift that is reordering Asia’s manufacturing and political landscape.

In May 2025, Apple CEO Tim Cook warned that rising US trade tariffs imposed against China – which was then home to the large majority of iPhone manufacturing – could cost his firm USD 900 million in just a single quarter. The addition of huge Indian manufacturing capacity was his response. After years of reliance on China, he explained: “Having everything in one location had too much risk.”¹⁰

Foxconn’s new iPhone factory is contributing to rapid supply chain diversification that leaves China on the brink of losing its status as the leading smartphone exporter to the US. Between 2021 and 2025, India rocketed from 0.49% of US smartphone imports to 42.3% (valued at USD 22 billion).¹¹

In today’s fragmenting global order, Apple’s decision is a microcosm of a wider trend, as businesses and governments look to build diverse, secure supply chains that will hold up in the event of geopolitical shocks or economic coercion. Often, this means moving manufacturing away from China. For nations across South and Southeast Asia – which have long been known for their ability to adapt quickly to changing market conditions – this shift is creating a huge new opportunity.

Embedded in the AI value chain

Electronics expertise has put the region at the forefront of a global wave of investment in artificial intelligence (AI) and data centre build-out. While Taiwan’s dominance of leading-edge chip manufacture is well established, a number of other Asian nations have taken world-leading, highly specialised roles along the AI hardware supply chain.

More than 85% of global semiconductor exports and 65% of AI-related products now come from Asian nations

South Korea has become the clearest illustration of this. Its semiconductor exports hit USD 41 billion in July 2026, a 179% year-on-year surge¹², driven overwhelmingly by memory chips for AI servers. Malaysia has ridden the same wave – the country’s electrical and electronics exports jumped 46.4% year-on-year in April 2026, underpinned by automotive and AI-related demand.¹³

Japan, meanwhile, maintains high global market share further up the supply chain as a key exporter of semiconductor manufacturing equipment.¹⁴ This specialist role is a sign of the breadth of expertise that pervades the region – more than 85% of global semiconductor exports and 65% of AI-related products now come from Asian nations¹⁵.

At the same time, Asia-Pacific is itself set to move from little more than a data centre spillover market to a key driver of global demand – according to consultants McKinsey, APAC could account for 34% of all data centre demand by 2030.¹⁶ China – already a major force in AI adoption and infrastructure – is leading the region, with Beijing reported to be drafting a USD 295 billion plan for a national network of data centres¹⁷.

Asia is benefitting from this shift in global investment patterns

Foreign Direct Investment flows into Asia

This combination of established demand and growing potential is driving strong investment – for instance, between January 2024 and May 2026, leading tech names including Amazon, Google, Microsoft, and Oracle made investments totalling more than USD 160 billion to build AI infrastructure across APAC.¹⁸

These huge Western commitments are part of the Foreign Direct Investment (FDI) which is flowing into Asian nations more quickly than any other developing region¹⁹. Some of this is intra-regional investment, while some comes from further afield, as Western businesses invest in new factories and infrastructure, targeting local profit or building new supply chains to secure their operations.

Developing Asia received USD 644 billion in FDI in 2025, roughly 40% of all FDI globally. According to UN Trade and Development, advanced industries such as AI, semiconductors, digital infrastructure, and clean energy technologies are taking a growing share of global FDI.²⁰ With its embedded advantages in these areas, Asia is benefitting from this shift in global investment patterns.

It’s worth noting that investors must remain vigilant. The biggest names in the sector (the so-called ‘hyperscalers’) are investing so heavily in data centre and related infrastructure build-out that they are outspending their operating cash flow. In Q2 2026, Alphabet posted its first negative free cash flow quarter since its 2004 IPO²¹ – and a sharp August wobble in semiconductor and hyperscaler valuations revived AI-angst, triggering a bout of volatility in South Korean equities. At Lombard Odier, however, we believe this is not, on its own, cause for alarm. With demand for AI computing power still outpacing the industry’s ability to bring capacity online, the benefits of AI adoption are likely to extend across the wider ecosystem, from semiconductors and infrastructure to cloud and software.

Asia’s new economic order takes shape

For investors, it’s important to understand that Asia is not a monolith. Each nation and sub-region is carving out its own distinct economic roles.

India has become the engine of South Asia’s growth, recording a 44% increase in FDI inflows in 2025.²² India’s ambition is founded on its youth – the country’s median age is 30, compared with 39 in the US and 40 in China, where the working-age population continues to contract²³.

The story is similar across ASEAN, where established economies with older demographics are being bolstered by more youthful, expanding workforces such as in the Philippines and Malaysia²⁴, turning the association into an economic pole in its own right. The bloc is on track to become the world’s fourth-largest economy by 2030, with its digital economy projected to more than double to USD 560 billion.²⁵

The global order is shifting, but this need not be a time for investors to hunker down

At Lombard Odier, we understand the endlessly varied and complex nature of Asia’s evolution – from ageing economies to youthful upstarts fast becoming indispensable in global supply chains. Nowhere embodies this complexity more clearly than China, which, despite demographic difficulties and the impact of US trade tariffs, achieved a record USD 1.2 trillion trade surplus in 2025²⁶. Even as ‘old China’ – property and legacy industrials – faces headwinds, ‘new China’ – cutting-edge renewables, electrification, and AI-related technology – shows extraordinary strength and ambition, creating opportunities for well-researched, selective investors.

Read also: A tale of two Chinas – the old and new economic divide

Our approach remains as it has always been: to take a step back from the loud headlines and to look beyond the emotion. We believe that over the medium to long term, markets are not driven by geopolitical shocks. Instead, investors must look deeper – at the fundamental system changes taking place in our global economy, and the changing shape of trade and political alliances. The solution to today’s uncertainty lies not in blanket defensive positioning, nor in adopting an “all-in” risk appetite, but in differentiation – identifying specific opportunities through a deep understanding of the region’s evolving complexities.

The global order is shifting, but this need not be a time for investors to hunker down. As the world’s biggest trading nations look to build new relationships and secure their supply chains, we believe Asia is ideally placed to capitalise on the huge opportunities created.