Asia’s electronics sector booms, bucking global economic slump
- The electronics industry is holding up relatively well, as companies adopt new technologies such as 5G and automation tools
- Some of the boom is specific to the health crisis, amid a global scramble for medical equipment and demand for videoconferencing and other remote working technologies
Global trade data in the Covid-19 era has been generally abysmal, but look a little closer and the electronics sector that fires Asia’s trade engines could be headed for a pretty good year.
“The tech industry seems to have decoupled from the overall economy somewhat, as the tech industry is still growing well” and has been “relatively immune to Covid-19”, Mark Liu, chairman of Taiwan Semiconductor Manufacturing Co (TSMC), said at a shareholder meeting on June 9.
TSMC shares have risen 27 per cent since their lowest close for the year on March 19, slightly less than the 32 per cent gain in Taiwan’s benchmark Taiex stock index in that time.
Amid generally awful export figures from the region, “the one bright spot is semiconductors”, said Trinh Nguyen, a senior economist at Natixis SA in Hong Kong. “A lot of this reflects the product cycle and also the global lockdown and suppression that favour the ‘digitalisation’ of economic activities, driving demand for electronic goods like chips.”
It helps that some of Asia’s most tech-focused economies have had relative success in containing the virus: Taiwan has reported just seven virus deaths, South Korea flattened its curve fairly early and Singapore’s fatality rate is among the world’s lowest. That gives momentum to efforts to restart tech engines and get consumers used to new ways of doing business.
China’s hi-tech industries capitalise on Covid-19 pandemic health care needs
“We’re seeing more countries pledging economic reforms, and there’s increased urgency for a stronger technology push to lead the economic recovery,” said Zhao Defa, an economist at Continuum Economics in Singapore. “Given that South Korea and Taiwan are the world’s main semiconductor producers, they will be beneficiaries.”
Some of the boom is specific to the health crisis, amid a global scramble for medical equipment and demand for videoconferencing and other technologies as work and school shift more to people’s homes.
China’s medical exports and shipments of hi-tech electronics jumped in both April and May, for example, while Singapore’s pharmaceutical shipments surged 174 per cent in April from a year earlier.
Further gains may not be as pronounced.
While 5G, high-performance computing and artificial intelligence will all create demand for Taiwan’s exports, setbacks from Covid-19 and US-China tech tensions could constrain that progress, Beatrice Tsai, director general of the statistics department at Taiwan’s Ministry of Finance, said on June 8.
China’s export orders have taken a hit from the lockdowns in the US and key European markets, said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit. A second-half recovery in those economies, as well as Christmas orders, could drive a rebound in tech exports, he said.
Governments have tried to stay focused on the long term, aiming to take advantage of the technology sector’s relative advantage in the pandemic by providing special support for electronics firms and new technologies. Singapore pledged S$500 million (US$360 million) last month to help businesses in their digital transformations, including moving hawker centre stalls to e-payments, and is spending another S$3.5 billion on information and communications technology to mitigate the virus outbreak.
When the virus’ spread threatened Vietnam’s burgeoning technology industry, the government granted an exception to its otherwise strict lockdown measures: Samsung Electronics, which makes about half of its smartphones in factories near Hanoi and is one of Vietnam’s largest investors, was allowed to shuttle in more than 1,000 engineers from South Korea.
“The recovery will be digital,” Anand Swaminathan, senior partner and head of McKinsey Digital in Asia, said in a June 9 interview. Asian governments are “all starting to figure out what their investment strategy is on digital”.