Why Asia’s pent-up demand for scarce semiconductors is not temporary
HONG KONG --Exports are booming, the backlog of orders is piling up, and chips are in short supply as Asia becomes an epitome of global economic recovery -- production capacity falling behind new orders.
In a special report on the semiconductor industry in Asia, and its regional and global implications, Natixis points out that spanning demand from consumer electronics to auto chips, the shortage of semiconductors is everywhere.
Naatixis says the degree and length of chip scarcity will have big implications globally, especially as semiconductors plays a central role more than ever in supply chains, such as autos, consumer goods, information technology, and 5G-releated sectors.
"In addition, the bottleneck in semiconductors can also add fuel to inflationary pressure in Asia and beyond," Natixis says.
"Asia is now the biggest market for semiconductors, making up 62% of world demand in 2020, compared to 56% in 2012.
"China is the biggest consumer, rising from 29% to 35% of global demand for the same period."
Naatixis says the strong Asian demand can be explained by the central role in the production of electronic products, with the ongoing push for 5G technologies creating extra needs for chips in the case of China.
"The current chip shortage is driven by some temporary factors, such as COVID-19, which has reduced production capacity at a time of surging demand. (And) with the prevalence of remote working and the staying at-home trend, sales of consumer electronics have been strong.
"But there is a mismatch between investment on larger wafers and limited expansion for the rest, which are still vital for many components."
Natixis says that apart from temporary factors, the driving forces come from megatrends in changing consumer behaviour.
"First and foremost, 5G will lead to changes in many industries, such as data centres, wireless communication, and robotics. In the same vein, chips are centric for electric vehicles.
"On supply, geopolitics has become a structural issue because the Biden Administration is clearly not on a reset mode with China.
"Such risks are bound to hamper capex as firms may be forced to choose between two emerging ecosystems. One system is led by the US, Europe, and more recently Japan and Taiwan.
"South Korea has somehow maintained a middle course in the other system with Mainland China, but doubts remain due to pressure from the US."