Global Electronics/ICT Industry Outlook 2023

The impacts of challenging economic conditions were felt by the electronics/ICT industry during the first half of this year. However, recent signs suggest the downturn is now levelling out and growth is predicted in the near term.

In fact, the ICT segment of the industry is likely to become one of the world’s fastest growing manufacturing sectors in the next few years. The outlook is not entirely bright, however. Clouding the horizon are geopolitical issues, including tensions over the supply of semiconductors, and the potential for market saturation.

What are the primary issues facing the electronics/ICT markets?

Ongoing US-China tensions and so called ‘chip nationalism’ are major issues that could present trading risks for the industry. Semiconductor production is a strategic priority for Asia, Europe and the US, with legislation and subsidies used in several countries to support growth and reshoring.

However, this unilateral approach presents market risks including potential duplication and oversupply and increased costs due to higher labour costs in advanced economies.

One potential consequence of China-US tensions is the possibility of growth in some of Asia’s emerging economies, particularly Vietnam and India. But this growth is not universal. Japanese semiconductor firms generate 20-30% of their business in China and stand to lose about 70% of it as a result of US curbs. South Korea exports about half of its memory chips to China. Taiwanese and Korean producers are also heavily invested in manufacturing facilities in China.

Currently, Taiwan is the world’s leading producer of advanced semiconductors. Anything that causes disruption to production could be catastrophic to the global electronics/ICT industry, with some estimates pointing to USD trillions of lost trade. This gives Taiwan a degree of strategic importance and global protection from outside threats, a protection that may wane if other geographies succeed in reshoring high-end chip development.

Certainly, trade tensions are among the most serious downside risks to the industry over the coming years. However, digitalisation and demand for advanced semiconductors in a range of segments from electric vehicles to manufacturing, in addition to computing, are likely to support industry growth.

Kyle Kong, Atradius ICT expert and Senior Credit Risk Analyst in Taipei, Taiwan explores these issues in more detail along with the outlook for the industry in the Global Electronics/ICT Industry Outlook 2023.