Reports
30 October 2019 

Asia and the global tech slump: The chips are down

For much of this year, economic and export growth in Asia has been very disappointing

Most people probably put this down to the Trade War

But a big part of the slowdown has stemmed from a global slump in demand for and prices of electronic items

Put another way, Asia has been hit by the global tech slump

Executive summary

To understand current Asian economic weakness, we have to go back in time. 2015 and 2016 were weak years for Asia. Exports and growth both fell. The cause? There were many, but a contributory factor was the lagged effects of earlier low oil prices. The negative terms-of-trade effect for the oil producers (Middle East, Russia, US) meant that they could afford to buy fewer Asian exports. This began to change as oil prices nosed back up to the US$60/bbl area. For some Asian economies, it appears there is such a thing as too low an oil price.

And the exports that Asia produces which the rest of the world didn’t buy? There is one type of good that dominates Asian production and exports. Electronics. Whether this is consumer electronics or the component parts that make them work, the vast majority of these goods worldwide are made in Asia. And each year, Asia’s dominance in these industries grows.

Through 2017 and 2018, the better environment for Asian exports led to a familiar phenomenon in the electronics industry, and in particular, for the semiconductor industry. Investment picked up sharply to boost production capacity.


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