Dragoman Digest

Japan’s robotics giants seek to adapt to the AI era

Hardware precision no longer guarantees market dominance without the data and software to match

Japan’s industrial robotics companies controlled around 80 percent of the global market in the 1980s, built on unmatched precision in preprogrammed manufacturing tasks. That share has since slumped to roughly 40 percent in 2024. The emergence of “physical AI” – the convergence of AI and robotics – is shifting competitive advantage away from incremental mechanical refinement toward general-purpose machines that learn autonomously, where the volume and diversity of training data matters most. In this space, rivals such as Tesla and China’s Unitree Robotics have gained ground by leveraging existing data ecosystems and rapid real-world deployment. Other non-traditional players have also entered the fray. SoftBank Group’s US$5.38 billion acquisition of Swiss-based ABB’s robotics division – one of the industry’s “big four” – aims to combine software from its portfolio of roughly 20 robotics companies, mostly startups, with ABB’s established hardware base.

Leading Japanese manufacturers have responded by abandoning their traditionally proprietary approach. Fanuc announced a tie-up with Nvidia in December involving open-source control software, enabling external engineers to develop applications for Fanuc robots and collect data through simulated environments. Yaskawa has explored collaborations with Nvidia, Fujitsu, and SoftBank Corp., though its efforts largely remain at the proof-of-concept stage. Yet these partners are simultaneously competitors, building their own physical AI platforms. Simulated environments and external developers also remain a partial substitute for the real-world operational data that underpins China’s deployment-led advantage. China now accounts for more than half of all new industrial robot installations globally, with deployment extending beyond factories into hospitals, warehouses, and elderly care.

Western and Japanese companies nonetheless dominate the premium end of the market, including within China itself. Japanese firms such as Harmonic Drive and Nabtesco also supply high-end components critical to advanced robotics that Beijing is actively targeting. However, these chokepoints offer diminishing protection as China pairs state funding with guaranteed demand from SOEs to systematically narrow dependencies. Japan’s incumbents retain world-class manufacturing capabilities, but without comparable investment in data infrastructure and AI integration, their partnerships risk amounting to a managed retreat.

Indonesia’s stock market transparency crisis threatens capital market ambitions

MSCI’s freeze on Indonesian equities risks a US$60 billion outflow just as Jakarta seeks to revive its IPO market

On 27 January, global index provider MSCI froze changes to Indonesian stocks across its indexes, citing a lack of transparency and low free-float ratios (the share of stock available for public trading) among listed companies. The benchmark Jakarta Composite Index slid 7.3 percent in a single session. A full downgrade from emerging to frontier market status – possible as early as May – could trigger more than US$60 billion in foreign fund outflows as institutional investors withdraw. The rout forced the resignation of the Indonesia Stock Exchange’s chief executive, who had targeted 50 IPOs this year after just 26 in 2025. The underlying problem is structural. Conglomerates and SOEs with often opaque finances dominate the exchange, retaining the vast majority of shares and limiting access for public investors. What remains is traded largely by retail investors, amplifying volatility.

These pressures sit within a broader pattern of investor anxieties around aspects of Indonesia’s governance. President Prabowo Subianto’s successful installation of his nephew as deputy governor of Bank Indonesia in late January drove the rupiah to a record low of 16,985 per US dollar. The launch of Danantara, a sovereign wealth fund consolidating US$900 billion in SOE assets, has accentuated concerns over cronyism as well as convoluted governance structures. Danantara’s board, comprised largely of close Prabowo affiliates – including CEO and Prabowo’s former campaign manager Rosan Roeslani – raises questions about whether the fund will prioritise long-term investor returns or serve Indonesia’s ruling elite. A predecessor vehicle which remains in operation, the Indonesia Investment Authority, channelled foreign capital into debt-heavy construction SOEs that served (former President) Jokowi-era political objectives.

The Prabowo administration’s eight percent growth target will be difficult to achieve without an uptick in foreign investment. FDI fell 8.9 percent year-on-year in the third quarter of 2025 to US$4.7 billion – less than the US$5.6 billion attracted by the much smaller Vietnamese economy in the same period. MSCI’s demands may ultimately benefit Jakarta’s capital markets, but will require reforms in regulatory certainty, fiscal discipline, and institutional independence that have so far taken a back seat to headline ambitions.

AI’s insatiable demand for memory chips is squeezing the global electronics industry

A shortage expected to last years is opening the door for Chinese chipmakers

The rapid buildout of AI data centres is draining global supplies of memory chips – the components that allow devices to store and quickly access data. Three firms dominate production: South Korea’s Samsung and SK Hynix, and US manufacturer Micron. All three have redirected manufacturing toward high-bandwidth memory (HBM), a higher-margin product built from stacked conventional memory (DRAM) chips (used in everyday electronics) for use in the AI processors deployed in data centres. HBM will consume 23 percent of total DRAM wafer output in 2026, up from 19 percent last year. The result is a deepening shortage of conventional memory for companies across the mobile phone, gaming, and broader electronics sector. Supplier inventories have collapsed from 13-17 weeks in late 2024 to 2-4 weeks by October 2025. SK Hynix predicts the shortfall will persist through late 2027. New fabrication plants take at least two years to build.

The consequences are cascading across the industry. Sony is considering delaying its next PlayStation console to 2028 or 2029. Chinese smartphone makers including Xiaomi and Oppo are trimming 2026 shipment targets, with Oppo cutting its forecast by up to 20 percent. Budget devices, whose thin margins leave little room to absorb rising input costs, are particularly exposed. The structural pressure on pricing shows no sign of easing. Alphabet, Amazon, and Meta alone have committed over US$500 billion in capital spending this year.

A side effect of the supply crunch is lower entry barriers to Chinese chipmakers. US-blacklisted Yangtze Memory Technologies is expanding into markets across Southeast Asia and Taiwan. PC makers HP and Dell are for the first time qualifying products from ChangXin Memory Technologies, while Acer and Asus are leaning on Chinese contract manufacturers to help source memory components. These are all shifts that would have been unlikely before the shortage, and run counter to US efforts to constrain China’s semiconductor industry. Once embedded in Western supply chains, Chinese producers will be difficult to displace.

Thailand’s economic slide leaves it trailing regional peers

Revolving-door leadership has stalled the reforms needed to reverse course

Thailand’s GDP grew just 2.4 percent in 2025, down from 2.9 percent in 2024 and well behind Southeast Asian peers Malaysia (5.2 percent), Singapore (5 percent), and Vietnam (8 percent). Growth has hovered around two percent for five years, a far cry from the double-digit expansion that earned Thailand “Asian tiger” status in the late 1980s. The country’s key economic pillars are deteriorating in parallel. Manufacturing has been in sustained decline, weighed down by cheaper Chinese imports and competition from newer hubs like Vietnam. Major Japanese automakers including Nissan, Honda, and Suzuki have shut down or scaled back Thai operations, largely because of competition from Chinese EVs. Tourism dropped seven percent in 2025 to 32.9 million visitors, remaining well below the pre-pandemic peak of 40 million. Household debt is near 90 percent of GDP – among the highest in Asia – and stagnant wages have further suppressed domestic consumption.

Broader indicators confirm the malaise runs deeper than any single sector. Thailand’s stock market was Asia’s worst performer in 2025, declining 10 percent, while the property market entered its deepest slump in three decades. Though Thailand has remained resilient amidst US tariffs, driven in part by supply chain diversification out of China, the baht’s appreciation against the dollar is an unwelcome headwind. A shrinking population – the birth rate hit a 75-year low in 2025 – is removing the demographic dividend that once underpinned growth.

Economists broadly agree that Thailand must pivot toward higher-value industries such as data centres, pharmaceuticals, and biotechnology, while easing restrictions on foreign investment. Yet such a transition demands sustained political commitment that Thailand’s fractured system has struggled to provide. The royalist-military establishment has repeatedly blocked reformist parties from power despite consecutive election victories, producing three prime ministers in three years. Prime Minister Anutin Charnvirakul, of the conservative Bhumjaithai Party, secured a larger-than-expected election victory on 8 February, the first for an establishment-aligned party this century. The result raised business confidence. Whether Anutin has the inclination or the capacity to deliver the deeper transformation that has eluded successive Thai governments remains an open question.