Moody’s Analytics, says that new electronics related investment appears to be shifting away from China, but chip and electronics production will stay in Asia for the foreseeable future.
Key Points
- Asia dominates global electronics production, particularly in semiconductors, with Taiwan and South Korea leading in advanced chip manufacturing. The U.S. and Europe rank far behind.
- Regional concentration has enabled substantial economies of scale but has become a point of concern in an era of increased geopolitical tension.
- Governments, aiming to bolster chip production and protect strategic technologies, are offering subsidies to attract leading chipmakers to their shores.
- New chipmaking factories under construction across the globe will make chip supply more resilient to shocks but don’t point to a wholesale departure from Asia.
- New investment appears to be shifting away from China, but chip and electronics production will stay in Asia for the foreseeable future.
Analysis of the Orbis Crossborder Investment database, which tracks company-reported gross foreign direct investment, shows a decline in the number of electronics-related investment projects completed over the last three years compared with the three years before the pandemic.
But capital expenditure involved has jumped during the same period. The results vary by economy. For ASEAN economies, especially Vietnam, Malaysia, and Singapore, the number of projects and the capex value have increased. The opposite is the case in China. Data for the U.S. and Western Europe are more ambiguous—project count has declined, but capex amounts have increased.
Moody’s Investors Service finds that Klarna Bank’s AI assistant is driving material credit improvement sooner than expected. Klarna expects the AI assistant will lead to a $40 million profit improvement in its 2024 financial results. The projected profit improvement is credit positive for Klarna, which reported a net loss of SKR2.5 billion ($242 million) for 2023. It illustrates the transformative potential of AI in the banking sector, which can be realized faster than anticipated. Although we expect that banking will benefit significantly from AI over the next two to five years , Klarna’s immediate efficiency gains and cost savings from its AI assistant indicate that some banks’ benefits may occur more quickly, where their use of AI operates at a level that is within their conduct risk appetite.
