Asia remains the dominant force in
electronics production
for the foreseeable future even as China finds itself increasingly isolated when it comes to new investments in the
semiconductor industry
, according to a report by
Moody's Analytics
. It added that the dominance is underscored by the fact that all advanced chip production currently takes place in Taiwan and South Korea, with the US and Europe lagging far behind, each producing less than 10% of the global chip supply.
“Asia’s leadership in chips has had certain advantages. Centralising chip production among a few large companies has led to enormous economies of scale and created a regional supply chain that caters to the industry’s needs,” the report said.
“Whereas Taiwanese and South Korean tech giants such as Taiwan Semiconductor Manufacturing Co. or Samsung Electronics Co. specialise in high-end semiconductors, manufacturers in Southeast Asia supply legacy chips - less advanced but highly efficient chips used in cars through to consumer appliances and defence equipment,” the report added.
Meanwhile, Japanese companies specialise in providing materials and equipment used in the production of semiconductors.
Downsides of Asia’s tech dominance
Moody’s Analytics said that while Asia’s tech dominance comes with a fair share of downsides. For example, the Taiwanese economy is strongly linked to the health of the global semiconductor industry. This means that the trade and output figures are dependent on the ups and downs of global chip billings. When chips do well, so does the Taiwanese economy.
This can be explained by the fact that a surge in demand for global electronics during Covid-19 pandemic allowed Taiwan, among other countries, to avoid a recession. But when electronics demand slumped after the pandemic, it impacted the fortunes of the nation’s tech companies. This was a key issue in Taiwan’s recent presidential election, the report said.
Governments looking for diversification
In a bid to reduce dependence on a single country for the world’s leading-edge chips that are being made in an economy that lacks clear international status and lessen the risks involved, the governments are looking to re-shore chip production and safeguard key technologies against Chinese influence.
The US, Japanese and European governments plan to increase their share of global chip production and are offering substantial subsidies to lure chip-makers to their shores. The US has also worked with The Netherlands and Japan to restrict exports to China of chip-making tools, the report noted.
India is an emerging player
the report comes as India is also emerging as a big player in this space. Several companies, including Micron, are looking to produce domestically manufactured chips in near future.
The Union Cabinet on Thursday (February 29) approved chip fabrication plants by Tata Group and Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC) in Dholera district, Gujarat as India aims to become a global semiconductor hub.
English (US) ·