Moody’s Analytics: New Investment in Semiconductor Chips Staying in Asia but Shifting Away from China

Moody’s Analytics predicts that even as new investments in the semiconductor industry shift away from China, Asia will remain the hub for electronics production. Taiwan and South Korea lead in chip production, while US and Europe produce less than 10 percent of global chip supply.

The report highlights Asia’s dominance in chip production, with Taiwanese and South Korean companies specializing in high-end semiconductors and Southeast Asian manufacturers focusing on legacy chips. Japanese companies play a role in providing materials and equipment for semiconductor production.

Taiwan’s economy heavily relies on the success of the global semiconductor industry, causing fluctuations in trade and output based on chip demand. The report notes the downside of Asia’s tech dominance, such as Taiwan’s vulnerability to the performance of the semiconductor market.

Amid concerns about industry concentration in Asia, governments are seeking to re-shore chip production to reduce reliance on the region. The US, Japan, and European countries are offering subsidies to attract chip-makers, with efforts to safeguard key technologies against Chinese influence.

Despite chip shortages during the pandemic and China’s efforts to boost semiconductor production, manufacturers are hesitant to relocate production to the West. ASEAN economies like Vietnam, Malaysia, and Singapore have seen an increase in electronics-related investment projects, while China’s numbers have declined.

Asia’s advantageous supply chain, massive chip production capacity, and proximity to end consumers make it a preferred location for chip and electronics production. The region also benefits from favorable exchange rates, with Japan’s depreciated yen making it an affordable production base.

In conclusion, Moody’s Analytics forecasts that chip and electronics production will continue to thrive in Asia due to the region’s geographical advantage, access to production capacity, and attractive economic factors. The ongoing shift in investment patterns highlights the evolving landscape of the global semiconductor industry.