Asia-Pacific’s technology sector has been flourishing thanks to the semiconductor surge, even as other industries grapple with global macroeconomic uncertainty, as highlighted by investment bank JPMorgan.
“Tech has been recovering, that’s why Asia has done reasonably well in the second half of last year. China’s industry benefited, and North Asia benefited more from it,” remarked Bruce Kasman, chief economist at JPMorgan, during a media briefing on Tuesday.
The technology sector, which saw a surge during the COVID-19 pandemic as companies hastened their digitalization efforts, experienced a slowdown in 2022 and 2023 due to high inflation and interest rates, which dampened consumer spending, impacted product demand, and led to workforce reductions.
Global tech spending waned in 2023 while job cuts increased, according to Deloitte’s report on the tech industry’s 2024 outlook.
“But there are now glimmers of hope that a tech comeback may be imminent: Economists have lowered their assessments of recession risk, and analysts are optimistic that the tech sector could return to modest growth in 2024,” stated Deloitte.
The resurgence in technology is noteworthy as other sectors continue to face challenges. “Even though we have seen a recovery in tech, we are not seeing a broader-based recovery in the non-tech sectors,” noted Ong Sin Beng, head of EM Asia economics research at JPMorgan, on Tuesday.
The artificial intelligence boom continues to drive tech growth, particularly benefiting chipmakers.
U.S. chip design firm Nvidia reported a 265% surge in fourth-quarter revenue, driven by soaring demand for its graphics processing units, thousands of which are utilized to power and train OpenAI’s ChatGPT.
However, the recovery varies across the tech sector, with JPMorgan singling out the semiconductor industry as the bright spot amid the AI boom.
“It is primarily in the semiconductor, dynamic random access memory sector. So we are seeing, for example, Korean production doing quite well. Taiwan is because of the logic chips we are seeing that do relatively well. So those are the two key beneficiaries in North Asia,” Ong said.
Taiwan’s TSMC serves as the primary contract chip manufacturer for Nvidia and has reaped the rewards of Nvidia’s performance and potential.
South Korean DRAM chip makers like Samsung Electronics and SK Hynix have also profited from the AI boom as large language models like ChatGPT necessitate high-performance memory chips to generate human-like responses.
“Our equity analysts who oversee the sector remain quite positive simply because it’s built out of broader digitization, data centers, AI, etc,” Ong remarked.
He also highlighted Singapore’s involvement in the semiconductor boom, noting that the country manufactures 20% of global chip equipment, according to data shared at the Singapore Semiconductor Industry Association Semiconductor Business Connect 2022.
Last month, Singapore’s deputy prime minister, Lawrence Wong, announced in his Budget speech that the country will invest over 1 billion Singapore dollars ($743 million) over the next five years to further enhance the country’s AI capabilities.
As part of this investment, Singapore aims to secure access to advanced chips “that are so crucial to AI development and deployment,” Wong stated.
