The last five years brought significant change and challenges to the global semiconductor market. Demand reached record highs while the COVID-19 pandemic threatened supply chains worldwide with a global semiconductor shortage. The Americas, EMEA (Europe, Middle East, and Africa) and APAC (Asia-Pacific) markets heavily rely on these supply chains, and the chip industry is directly driving economic growth in each region, year over year.
This article explores the current global landscape of semiconductor production and the microchip market to understand the future of the electronics industry.
Chip industry demand: The current landscape
Consumer usage of complex semiconductor chips has grown exponentially in the last decade as electronics permeate everyday life. We've seen a dramatic transformation in the automotive, industrial, and healthcare sectors.
North America, home to electronics pioneers like Intel and Texas Instruments, has long outsourced most of its manufacturing to other regions. Yet demand for chips in the Americas is staggeringly high, with a single modern car boasting over 1,000+ IC chips.
However, the APAC market is currently the largest for electronics chips, with China, South Korea, and Japan being the top three electronics consumers. This consumption is largely due to the region's manufacturing capabilities, as many of the largest chip manufacturers and electronics assemblies are in Asia. Although chip production in the Americas and EMEA markets occurs at a much smaller scale, these areas are home to some of the more complex —and proprietary—electronics manufacturing and assembly plants. The automotive and industrial sectors drive the demand and manufacturing response for electronics chips in the U.S., while the healthcare and telecommunication industries have been significant drivers of growth in EMEA.
A global semiconductor shortage
As the COVID pandemic so humbly reminded the world, the electronics industries in the Americas, EMEA, and APAC regions rely on each other. The Americas and EMEA need APAC to produce electronic components and devices such as smartphones, laptops, computers, and many consumer electronics devices. In turn, large electronic assemblies in China may source ICs from Taiwan, passives from India, and raw materials from EMEA before shipping finished goods to the U.S.
In 2023, semiconductor production by country sees Taiwan, South Korea, Japan, China, United States, Germany, United Kingdom, Malaysia, Netherlands, and Israel as the global leaders. However, this distribution of manufacturing may change in the coming years.
The future of the semiconductor industry
Technological advancements, changes in global trade policies, changes to local manufacturing incentives, and the growing demand for electronic devices will continually reshape the global landscape of the electronics industry. In 2023, the ever-increasing adoption of 5G networks, the Internet of Things (IoT), smart automotive features, and smart medical devices are driving semiconductor industry growth far beyond pre-pandemic demands.
In a previous article, we outlined the challenges of expanding chip manufacturing in the U.S. Still, government-backed incentives such as the CHIPS Act aim to move historically outsourced manufacturing to the U.S., reducing dependency on China.
EMEA has seen similar changes to its manufacturing landscape, aiming to reduce its reliance on China and bolster its ability to produce high-tech electronic components. For example, STMicroelectronics and GlobalFoundries plan to open a $5.7 billion French chip factory to produce devices used in automotive, IoT, and mobile applications. Similarly, Intel plans to open a German chip plant, financially sponsored by the German government, as a part of their proposed $88 billion investment push in EU-based manufacturing. Infineon also announced a $5 billion investment in a power-semiconductors fab facility in Dresden, Germany—it's the largest single investment in the company's history. Also related, the European Union recently approved €8 Billion in state subsidies for chip research. Initiatives such as these will aid in molding the future of the semiconductor industry.
Changes in global trade policies are likely to impact the semiconductor industry further, as trade tensions between the U.S. and China have already led to restrictions on the export of certain products, further blocking downstream supply chains. This potential shift in the global supply chain has led companies like STMicro, GlobalFoundries, Intel, and Infineon to diversify their production and sourcing strategies.
A shifting, yet global semiconductor market
The future of electronic devices will adhere to Moore's Law (the number of transistors in a circuit doubles every two years), resulting in more complex fabrications worldwide. Semiconductor manufacturing facilities will become more sophisticated and expensive, yielding new devices that make historic fabs obsolete.
Think of the semiconductor market global landscape like tectonic plates: vast, complex, interconnected, and always shifting. With the America, EMEA, and APAC markets all playing critical roles, global supply chains are incredibly dependent on each region. Technological advances, international trade and manufacturing policies, and increasing demand will reshape the industry. As chip usage evolves, companies and governments will need to remain agile and adaptable to stay competitive and ultimately answer to the global demand of customers and constituents.
