Global electronics upturn boosts APAC manufacturing exports
East Asian electronics exports have risen sharply in late 2020 and early 2021, boosted by surging global electronics new orders. This is helping to drive buoyant export growth in a number of East Asian economies, notably South Korea, Taiwan and Vietnam. The strong rebound in global electronics demand has also created supply bottlenecks for electronics manufacturing firms, with shortages of semiconductors having already resulted in disruptions to auto production for some major auto manufacturers during the first quarter of 2021.
APAC electronics sector exports rebound
Asian electronics production suffered severe supply disruptions and slumping global demand due to the pandemic and lockdowns in the first half of 2020. However, the S&P Global Global Electronics Purchasing Managers’ Index (PMI) has signaled a strong rebound since mid-2020 as global lockdowns were eased and consumer spending rebounded in many major economies.
The electronics sector rebound is making an important contribution to the recovery of manufacturing exports and industrial production in many East Asian industrial economies. The electronics manufacturing industry is an important part of the manufacturing export sector for many Asian economies, including South Korea, China, Japan, Malaysia, Singapore, Philippines, Taiwan, Thailand and Vietnam. Furthermore, the electronics supply chain is highly integrated across different economies in East Asia.
The S&P Global Global Electronics PMI new orders index rose from a calendar year-to-date low of 35.0 in May 2020 to a level of 53.4 by January 2021, reflecting a significant recovery in new orders.
This rebound in global electronics demand has been reflected in the recent industrial production and exports data for many East Asian economies.
South Korean electronics exports surge
The South Korean Ministry of Trade, Industry and Energy announced that South Korea’s exports of information and communications technology (ICT) goods in December 2020 amounted to USD 18 billion, up 24.9 percent compared to the same period last year. Exports of semiconductors rose by 30% y/y, while exports of display panels rose by 31% y/y. Exports of mobile phones rose by 48% y/y.
Reflecting the growing importance of Vietnam as a production hub for Korean electronics manufacturing multinationals, ICT exports from South Korea to Vietnam rose by 53.8% y/y in December, while ICT exports to the US also surged, growing by 32.5% y/y.
South Korea’s Ministry of Trade, Industry and Energy has projected that South Korean semiconductors exports in 2021 will rise by around 10% to USD 109 billion, due to buoyant global demand for electronics products.
With significant shortages of semiconductors having become evident during early 2021, this is expected to further boost South Korean semiconductors exports during 2021.
Taiwan faces semiconductors shortages as demand soars
Taiwan’s exports of electronics products surged in January 2021, rising by 47.5% y/y to USD 13.3 billion. Exports of semiconductors rose by 46.3% y/y, while exports of optical devices rose by 53.5% y/y. Due to strong global demand for computers, TVs and auto electronics, a severe shortage of semiconductor chips has developed in recent months.
Chip stockpiling during 2020 due to US government sanctions on certain Chinese technology companies have also contributed to the shortages. Global auto manufacturers as well as smartphone producers are among the industry segments that have been impacted by these shortages. According to S&P Global Mobility research, vehicle manufacturers are finding increased disruption within the supply chain of semiconductors to the automotive sector in the first quarter of 2020. Many automakers worldwide have reported disruptions to production due to shortages of semiconductors, including Ford, VW Group, GM, Honda and Mazda.
The extent of the shortages of critical electronics components has become so severe that high level consultations have been held with Taiwan involving key industry bodies as well as government officials from major industrial economies including the US and Germany.
Due to the severe shortages of critical electronics components such as chips and panels, electronics companies in Taiwan are trying to have employees work over the Chinese New Year holidays, which is a key holiday in Greater China. Significant price increases for some types of semiconductor chips are also expected to the demand-supply imbalances.
The shortage of semiconductors has driven up capital expenditure plans, with Taiwan’s TSMC, the world’s largest chipmaker, having announced plans to increase capital spending on production and development of advanced chips to a range of USD 25 billion to USD 28 billion in 2021, a 60% increase on 2020. Taiwan’s USMC, which also manufactures chips, plans to lift.