Asia Driving Electronics Growth

Electronics production in the major developed countries has been showing slow growth or declines in 2024. United States electronics production three-month-average change versus a year ago (3/12 change) was 0.4% in July 2024, the slowest since the pandemic year of 2020. Growth has been slowing since averaging 6.5% in 2022 and 2.3% in 2023. Japan has gone from averaging 6.0% 3/12 growth in 2023 to a 2% decline in June 2024. The 27 countries of the European Union (EU27) have reported declining electronics production since May 2023, except for a 3.2% increase in May 2024. In June 2024, EU27 production was down 8.0%. United Kingdom (UK) production has been declining since September 2023, except for a 0.7% increase in February 2024. UK production was down 3.7% in July 2024.

In contrast, most developing Asian countries are experiencing strong growth in electronics production. Taiwan and South Korea are considered developed countries, but their electronics industries are still emerging. Beginning in mid-2023, these countries showed a turnaround in production.

Taiwan has been the strongest country in Asia, with 3/12 production (measured in New Taiwan dollars) moving from a 3.2% decline in June 2023 to an increase of 49% in July 2024. This growth has been driven by computers, with production in January through July 2024 doubled versus January-July 2023. Much of the computer boom can be attributed to AI servers. Market Research firm MIC estimates Taiwan produces 90% of global AI servers. TrendForce projects the US dollar value of the AI server market will grow 69% in 2024.

Vietnam has also shown a strong turnaround in electronics production. The low in 3/12 change was negative 10.8% in May 2023. 3/12 growth was over 20% in June and July 2024. Vietnam has benefited from Samsung’s $22 billion investment in the country. Vietnam produces about half of Samsung’s smartphones.

South Korea’s production turnaround was more recent, with 3/12 production change negative in February through April 2024. Production turned positive in May 2024 at 3.2% and reached 23.8% growth in July 2024. Labor strikes this year at Samsung likely had an impact on production trends. The strong September growth may be a temporary blip.

India is demonstrating healthy electronics production growth, with July 2024 3/12 growth of 14%. 3/12 change had been negative from October 2022 through March 2024. India has benefited from multinational companies increasing manufacturing in the country. Apple has begun manufacturing its latest generation of iPhones, the 16 series, in India. Apple plans to produce 25% of its iPhones in India by 2025, up from about 14% last year, shifting production from China. Lenovo announced this month it has started making AI servers in India for local consumption and export. The government of India projects the country will double its electronics manufacturing over the next five years.

China remains the dominant electronics manufacturer in Asia, but growth has slowed as companies shift manufacturing to other countries. China’s 3/12 production change turned positive in April 2023 and peaked at 13.8% in June 2024. August 2024 3/12 growth was 12.3%, slower than the July data for the other countries in the chart.

The trend of weak electronics production growth in the U.S, Europe and Japan will likely continue for at least the next few years. Asia will remain the growth driver. Political and economic pressures affecting China will lead to continuing production shifts to other Asian nations. India seems poised for strong growth due to its huge labor force, low labor rates, and significant investment by multinational electronics companies.

Semiconductor Intelligence is a consulting firm providing market analysis, market insights and company analysis for anyone involved in the semiconductor industry – manufacturers, designers, foundries, suppliers, users or investors. Please contact me if you would like further information.

Bill Jewell
Semiconductor Intelligence, LLC
billjewell@sc-iq.com

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