Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
The role of East and Southeast Asia in the Global Value Chain in Electronics
02 November 2021Tomasz Brodzicki, Ph.D.
Key findings
East and Southeast Asia is a crucial hub of the global
electronic industry; its global role is the highest in the
production and exports of electronic components, including
semiconductors and consumer electronic goods such as
smartphones
The role of the regions is clearly shown by data on
exports levels, higher growth rates as well as export
specialization indices relative to the world
Trade data show increased exports of electronic
components through 2021 but not enough to service the skyrocketing
global demand affected by the pandemic and recovery from
Covid-19
Global semiconductor shortage will persist through 2021
and is likely to recover to normal levels only by the second
quarter of 2022, adversely affecting a number of critical
industries, including consumer and specialized electronics &
automobile
Currently observed high freight rates, port congestion,
and still, present restrictions due to the ongoing fourth wave of
Covid-19 are not helping the situation
Long-term adjustments in the electronic GVCs can be
expected with more investments required and location decisions
reconsidered
A number of qualitative factors can further complicate
the current situation
Introduction
The electronics industry is today one of the largest and key
global industries. Contemporary society uses a vast array of
electronic devices built in automated or semi-automated factories.
Products are primarily assembled from metal-oxide-semiconductor
(MOS) transistors and integrated circuits (IC), the latter
principally produced by photolithography and often on printed
circuit boards in wafer fabs. The central driving force behind the
entire electronics industry is the semiconductor industry sector,
with sales exceeding USD 500 billion yearly. Electronics has a
high-tech profile, is very knowledge and R&D intensive, and is
characterized by high entry costs (high capital intensity).
The electronics industry consists of several key components,
including:
Consumer electronics (including programmable digital circuits,
multimedia, video surveillance systems)
Industrial electronics (including power electronics, electronic
technological systems, control systems)
Radioelectronics (marine electronics, radiocommunication, and
radar technology)
Microelectronics, photonics, and nanotechnologies
Microsystems and electronic systems
The present article aims to identify the role of East and
Southeast Asia economies in the global value chain in electronics
using the data available in the <span/>IHS Markit
Global Trade Analytics Suite (GTAS), primarily data reported by
individual states from IHS Markit
Global Trade Atlas (GTA), as well as forecast from the IHS
Markit GTAS
Forecasting database.
The value of global exports of electronic products (with the
semiconductor industry being a part of it) according to GTAS
Forecasting is predicted to reach USD 2,885 billion in 2021 and
grow to USD 3,397 billion in 2030 with CAGR over 2022-30 exceeding
2.1 percent.
As we can see, the electronic industry has several key hubs with
the particular role played by the economies of East and Southeast
Asia. The zoom into the region shows the complexity of links.
Global trade in electronic components (Q2
2021)
Source: IHS Markit
Global Trade Atlas(GTA). Flows above USD 25 million in Q2
2021.
Global trade in electronic components (Q2 2021) Zoom
into East & Southeast Asia
Source: IHS MarkitGlobal Trade Atlas(GTA). Flows above USD 25
million in Q3 2021.
Semiconductors
According leading analyst, the installed capacity of
semiconductor integrated circuits (ICs) worldwide is projected to
reach 22.7 million of 200mm equivalent wafers per month as of
December 2021, an increase of nearly two million over December
2020. It thus represents an increase of global capacity by 9
percent.
The leaders of wafer capacity include Samsung (South Korea),
TSMC (Taiwan), Micron (USA), SK Hynix (South Korea), and Kioxia/WD
(Japan), with more than half of global capacity. The remaining top
10 have lower capacities - Intel, UMC, GlobalFoundries, Texas
Instruments, and SMIC.
Using the information on the location of semiconductor producers
globally, we have developed the map indicating a significant role
of the East and Southeast Asia region with other important
concentrations in Europe and throughout the United States. The zoom
into the region points to several key concentrations in Japan,
Taiwan, and South Korea. Plants within China are more evenly spread
around. At this stage of development, Taiwan hosts the most
significant number of wafers fabs globally.
Location of the semiconductor production facilities
globally and in the ESEA region
Source: Own elaboration based on processed data from
en.wikipedia.org/wiki/ List_of_semiconductor_fabrication_plants
accessed on 10/20/2021.
If we look at the
GTA data for HS8541 (Diodes, transistors and similar devices,
…, semiconductors), we can see that the exports value of most
EASA-11 states (Macao SAR not shown, is not reporting trade in
HS8541) in 2021 is significantly higher than in 2020. Thus, the
shortages could be attributed to significantly higher demand and
insufficient production capacities within the region and
worldwide.
The location data are correlated with exports data in GTA as can
be seen in the following chart using the exports data for 2020.
The role of airborne trade
A specific feature of the global electronics industry is that
most products are shipped by air. It applies in particular to the
production of semiconductors. Using the GTAS
Forecasting analytics dashboard for airborne trade, we can
observe that the major global exporters of semiconductors are
located in eastern and southeastern Asia and North America. The
list of the largest importers is the same. Major flows happened
between countries and territories of Eastern and Southeast Asia and
the United States. The biggest importers in Europe are Germany, the
UK, the Netherlands, and France.
Global trade in electronic components - semiconductors
transported by air (Q2 2021)
Lets' concentrate on exports of electronic parts, including
semiconductors, in terms of value in 2021. The top five exporters
from the region include mainland China, Malaysia, South Korea,
Taiwan, and Japan. Their exports value in 2021 surpasses the export
value of electronic parts, including semiconductors from the United
States.
Share of the region in the global exports of electronic
components
The 11 states of eastern and southeastern Asia (ESEA-11) in
total are responsible for 68.4% of global production exports of
electronic parts with the top five positions taken by mainland
China (32.7% of worldwide exports), followed by Taiwan and South
Korea responsible for 7.4% and 6.0% of global exports,
respectively. We predict that the situation is not going to change
in the short-run future 2022-2023.
If we look at the exports from the region from a product
perspective, the region's role is the most significant in
electronic components and telephones and exceeds 70%. The region
has the lowest share in optical and measuring equipment, 40%, and
watches and clocks around 30% of global exports. It is nevertheless
still significant.Source: IHS Markit GTAS
Forecasting.
Growth rates are higher in the region
If we look at the electronics industry's global exports from a
dynamic perspective, it is clear that east and Southeast Asia are
growing faster than the rest of the world. The difference was
particularly large in 2020, affected by the COVID-19 pandemic but
not in 2021. we predict that CAGRS for global exports and the
region exports will be similar over 2022 to 2030, in favor of the
region. Considering the current production possibilities, the
predicted growth rates are lower than in the period preceding the
COVID-19 pandemic.
Export specialization in electronic products in
ESEA-11
Using the data from the GTAS
Forecasting database, we calculated the indices of relative
comparative advantage or RCA indices for all significant
subcomponents of the electronic industry. The value of two, for
instance, means that a given country has twice the export share of
a given commodity relative to the world average, which is
indicative of specialization. The highest RCA values for electronic
components are in Taiwan (8.4), followed by Malaysia (6.7) and the
Philippines (5.8). They are higher than can be observed in the
region's largest economies, including China (1.4), Japan (1.6), and
South Korea (4.1). Mainland China has the highest relative export
specialization indices values for telephones and microphones,
followed by office machines and parts and radios and TV's.
The region seems to be specialized in every specific element of
the electronics industry. It is relatively easy to identify the
potential supplier of electronic components within the area or to
identify potential assembly plants within the region.
Concluding remarks
The global value chain in electronic products has been disrupted
for more than a year, with the crisis centered on semiconductors.
It is a side effect of the COVID-19 pandemic, with increased demand
for personal computers, tablets, and smartphones, at the height of
the pandemic and the subsequent recovery from it in which direct
and indirect demand for electronic products and components met with
limited production possibilities adversely affected by
Covid-related closures at wafer fabs and international shipping
ports, port congestion and increased costs of freight.
The forecasted lower growth rates in global demand in 2022 can,
to some extent, ease off the pressures on this crucial industry in
the short run. Nonetheless, in the long run, the production of
electronic components must increase, taking into account the higher
dependency of the global economy on this high-tech sector. It
applies to the semiconductor industry in particular. The worldwide
semiconductor shortage will persist through 2021 and is expected in
the report by Gartner to recover to normal levels only by the
second quarter of 2022. It will adversely affect production in many
chip-dependent GVC, not only in electronics, and affect the
production volumes of specialized products while simultaneously
impacting prices.
The solution to the problem has to partially come out from the
East and Southeast Asia region itself. But not only. The global
economy needs more production facilities that are extremely
expensive and complex and, despite high levels of automation,
require highly skilled workers.
Still, in general, some more profound adjustments in GVCs can
also be expected, affecting location choices, investment in
increased production capacities, and significant trade flows.
Investors from North America or Europe could, for instance,
increasingly prefer locations in closer proximity to final assembly
plants, so more nearshoring could be expected. In the long run,
access to key resources such as roll earth minerals will be of key
significance. The problem can only be partially resolved by
enhancing electronic ways policies and recycling.
The qualitative factors to be considered include:
the ratification process of the RCEP agreement, which we
perceive as a clear game-changer in the East and Southeast Asia and
Pacific region. One of the ideas behind the RCEP is the development
of value chains within the region
the recently escalating tensions between mainland China and
Taiwan could have significant consequences within the region and
globally
The US trade policy adjustments Biden's administration
introduced could also affect the Asian Trade Policy affecting the
framework conditions
changes in the regulatory environment, increasing the costs of
production
the further path of Covid-19 pandemic with extended impact on
global economy due to insufficient vaccination pace globally
Subscribe to our monthly newsletter and stay
up-to-date with our latest analytics
We are proud to sponsor the @BAFT 2022 MENA Bank to Bank Forum hybrid event in Dubai on 24-25 May. Our… https://t.co/TsVgpBcBUT
May 20
{"items" : [
{"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"https://www.facebook.com/sharer.php?u=http%3a%2f%2fihsmarkit.com%2fresearch-analysis%2fthe-role-of-east-and-southeast-asia-in-the-global-value-chain-.html","enabled":true},{"name":"twitter","url":"https://twitter.com/intent/tweet?url=http%3a%2f%2fihsmarkit.com%2fresearch-analysis%2fthe-role-of-east-and-southeast-asia-in-the-global-value-chain-.html&text=The+role+of+East+and+Southeast+Asia+in+the+Global+Value+Chain+in+Electronics++%7c+IHS+Markit+","enabled":true},{"name":"linkedin","url":"https://www.linkedin.com/sharing/share-offsite/?url=http%3a%2f%2fihsmarkit.com%2fresearch-analysis%2fthe-role-of-east-and-southeast-asia-in-the-global-value-chain-.html","enabled":true},{"name":"email","url":"?subject=The role of East and Southeast Asia in the Global Value Chain in Electronics | IHS Markit &body=http%3a%2f%2fihsmarkit.com%2fresearch-analysis%2fthe-role-of-east-and-southeast-asia-in-the-global-value-chain-.html","enabled":true},{"name":"whatsapp","url":"https://api.whatsapp.com/send?text=The+role+of+East+and+Southeast+Asia+in+the+Global+Value+Chain+in+Electronics++%7c+IHS+Markit+ http%3a%2f%2fihsmarkit.com%2fresearch-analysis%2fthe-role-of-east-and-southeast-asia-in-the-global-value-chain-.html","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"}
]}