The semiconductor industry is experiencing a significant shift in global investment, with China losing its prominence while Asia emerges as the dominant force. According to a report by Moody’s Analytics, new investments are moving away from China, but electronics production is likely to remain in Asia for the foreseeable future.
Taiwan and South Korea lead the world in advanced chip production, accounting for all global production in this sector. In contrast, the United States and Europe each contribute less than 10% to the global chip supply. This concentration of chip production has resulted in substantial economies of scale and the creation of a regional supply chain that caters to the industry’s requirements.
While Taiwan and South Korea specialize in high-end semiconductors, manufacturers in Southeast Asia focus on legacy chips used in cars, consumer appliances, and defense equipment. Additionally, Japanese companies play a significant role by providing specialized materials and equipment necessary for semiconductor production.
However, Asia’s dominance in the semiconductor sector has its downsides. For instance, Taiwan’s economy is heavily reliant on electronics, making it vulnerable to fluctuations in global semiconductor demand. During the Covid-19 pandemic, Taiwan managed to avoid a recession due to increased demand for electronics. However, when the demand dropped, the fortunes of Taiwan’s tech giants declined, leading to weakened economic conditions.
Furthermore, there is growing concern among governments about the concentration of the semiconductor industry in Asia. The risks associated with relying on an economy that lacks clear international status, such as Taiwan, have prompted governments to seek ways to re-shore chip production and safeguard key technologies against Chinese influence. The US, Japan, and European countries are offering substantial subsidies to attract chip-makers and increase their share of global production.
Despite these efforts, manufacturers have shown little eagerness to return production to Western shores. The Orbis Crossborder Investment database indicates a decline in completed electronics-related investment projects in the past three years, with an increase in capital expenditure. ASEAN economies, particularly Vietnam, Malaysia, and Singapore, have experienced an increase in both project count and capital expenditure, while China has seen a decline.
Asia’s regional advantage in semiconductor production is supported by various factors, including easy access to large-scale chip production capacity, materials, and equipment. Additionally, being geographically close to end consumers, such as carmakers and electronics producers, provides Asian manufacturers with a significant advantage. The favorable exchange rates in Asian economies, particularly the depreciated yen in Japan, further contribute to their attractiveness as production bases.
In conclusion, while the semiconductor industry is experiencing a shift in global investment away from China, Asia remains the epicenter of electronics production. The regional supply chain, economies of scale, and geographical advantages provide a strong foundation for Asia’s dominance in the semiconductor sector.
FAQ
Q: What is the current trend in global investment in the semiconductor industry?
A: According to a report by Moody’s Analytics, new investments are moving away from China, but electronics production is likely to remain in Asia for the foreseeable future.
Q: Which countries lead in advanced chip production?
A: Taiwan and South Korea lead the world in advanced chip production, accounting for all global production in this sector.
Q: What do manufacturers in Southeast Asia specialize in?
A: Manufacturers in Southeast Asia focus on legacy chips used in cars, consumer appliances, and defense equipment.
Q: What role do Japanese companies play in the semiconductor industry?
A: Japanese companies provide specialized materials and equipment necessary for semiconductor production.
Q: What are the downsides to Asia’s dominance in the semiconductor sector?
A: The heavy reliance on electronics in Taiwan’s economy makes it vulnerable to fluctuations in global semiconductor demand, and there are growing concerns about the concentration of the industry in Asia.
Q: Which countries are offering subsidies to attract chip-makers?
A: The US, Japan, and European countries are offering substantial subsidies to attract chip-makers and increase their share of global production.
Q: Where have there been increases in electronics-related investment projects?
A: ASEAN economies, particularly Vietnam, Malaysia, and Singapore, have seen an increase in both project count and capital expenditure.
Definitions
Semiconductor industry: The industry involved in the design, manufacturing, and distribution of semiconductors, which are essential components in electronic devices.
Legacy chips: Chips that are used in older or basic technologies and applications, such as cars, consumer appliances, and defense equipment.
Economies of scale: The cost advantages that manufacturing companies gain by producing goods in large quantities, resulting in lower per-unit costs.
Supply chain: The sequence of processes involved in the production and distribution of a product, from sourcing raw materials to delivering the final product to consumers.
Geographical advantage: The advantage gained by being located in close proximity to key stakeholders or resources, such as end consumers or raw material sources.
Suggested Related Links:
– Moody’s Analytics
– Orbis Crossborder Investment
– Semiconductor Industry Association
The source of the article is from the blog elektrischnederland.nl