semi_conductor_desat_3_hr - overview

Reshoring likely to alter global electronics/ICT landscape

Semiconductor production becomes strategic priority for advanced economies

The USA, EU and several advanced economies across Asia have all defined semiconductor production as a major strategic priority. For the USA and EU in particular, this means growing the local industry.

Currently manufacturing of semiconductors in the USA and EU accounts for approximately 12% and 10% of the global total respectively. In a bid to reduce reliance on other countries and regions (mainly Asia) for such a key technology, governments are using legislation and subsidies in a bid to support domestic industries.

Such legislation is not confined to Western governments and includes: the Made in China 2025 policy, South Korean K-Chips Act, the Taiwan Chips Act, Japanese subsidies for semiconductor joint ventures, the EU Chips Act and the CHIPS and Science Act in the USA.

Chip nationalism: creating potential global risk

While such government support is undoubtedly great for the industry at a local level, such chip nationalism has the potential to create a global headache. As I note in our report, Global electronics/ICT Outlook, chip nationalism could lead to issues and risks for the wider industry.

The wider industry, beyond semiconductors, is at an interesting point. Current forecasts suggest ICT will be the world’s fastest growing sector over the next few years. However, the industry is also vulnerable to the changing currents and complexities of geopolitics.

Silicon shield and complexity of geopolitics

Political issues can cast shade over the electronics/ICT industry. Primary among these are the US-China trade tensions. There are already tariffs on a range of products and the USA has also imposed regulations to prevent Chinese companies from acquiring US semiconductor manufacturing technologies and equipment.

The USA has tried to reinforce this further through the Chip 4 Alliance with Japan, South Korea and Taiwan. However, this has yet to get off the ground, perhaps because China is still a key trading partner for these markets.

Taiwan’s leading position in advanced semiconductors currently gives it a position of global strategic importance, worthy of global protection in any increased conflict with China. This is the so-called silicon shield. That position could change as other markets develop local semiconductor capabilities, thus weakening Taiwan’s leading position.

However, how this could impact the geopolitics of the region and the level of risk it presents to the Taiwanese market remains to be seen.


Download our report: Global Electronics/ICT Outlook


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