The Asia region is an important production hub of global semiconductors and its peripheral products, accounting for more than 50% of global markets share, with South Korea, Taiwan and Mainland China leading in production and innovation. In this blog, we explore the semiconductor landscape in Asia and assess the macro implications for the Asia technology (tech) cycle.
Tech exports play an important role in Emerging Markets (EM) Asia
In many EM Asian countries, exports account for a large portion of their gross domestic product (GDP). For example, goods exports account for more than 30% of GDP in South Korea, Taiwan, Malaysia and Thailand. Among which Information and Communication Technology (ICT) has a significant share of total exports, especially in Taiwan and Malaysia.
Based on our estimates, semiconductor exports account for 60% or more of total ICT exports in Korea, Taiwan, Singapore, Malaysia and Philippines. Semiconductors also account for 43% of ICT exports in China, implying a dominant role of this sector in EM Asia manufacturing.
The EM Asia semiconductor landscape
Dominance of traditional powerhouses. South Korea is the leader in high-bandwidth memory (HBM) and edge-cutting technologies, with top producers dominating HBM production, which is critical for Artificial Intelligence (AI) applications. Taiwan remains central to advanced chip manufacturing, producing a large portion of the world’s most advanced semiconductors.
Southeast Asia’s strategic rise. Southeast Asia has been a critical hub for Assembly, Testing and Packaging (ATP), driven by competitive labor costs, infrastructure investment and policy support. Malaysia accounts for 13% of global ATP and hosts Intel’s USD7 billion (bn) chip packaging facilities. Singapore has grown itself into a leader in Research and Development (R&D) and equipment manufacturing, accounting for more than 11% of global semiconductor market share and approximately 20% of semiconductor equipment market share. Philippines specializes in silicon wafer assembly and stands as the world’s ninth-largest chip exporter.
China is catching up in legacy chips and ATP. Since 2022, tightening U.S. technology has been pushing China to catch up in legacy chips, where China now leads in capacity and is altering global dynamics, pressuring competitions in legacy markets. Meanwhile, China dominates outsourced assembly and testing, holding 38% of the global market share. In wafer fabrication, China’s Semiconductor Manufacturing International Corporation (SMIC) has emerged as the world’s third largest foundry.
Tech cycle, semiconductor cycle and AI cycle
Given the dominate role of semiconductors in EM Asia tech production, the key driver of the tech cycle is, indeed, the semiconductor cycle. Semiconductor’s production chain is long, spanning from upstream to downstream. This extensive production chain often results in upstream segments struggling to swiftly adapt to fluctuations in end user demand, leading to pronounced cyclicality within the semiconductor industry. At its core, these cycles fundamentally stem from periodic mismatches between supply and demand. Memory is the most cyclical segment within semiconductor production chain.
AI is transforming the semiconductor cycle. With Dynamic Random Access Memory (DRAM) accounting for approximately 60% of total memory sales, we use the DRAM price cycle as a proxy for measuring the tech cycle. A complete memory cycle used to last for around four years, and we are currently in the down turn of the cycle that began in 2021 and is expected to complete by 2025. However, this trough is much shallower than the average of previous cycles, which is related to strong demand for HBM due to the rise of AI.
The rise of DeepSeek has sparked extensive discussions on HBM demand. On the one hand, more DeepSeek-like memory demand will shift towards less advanced and cheaper nodes, negatively impacting profit margin. On the other hand, DeepSeek could accelerate AI adoption due to its cost efficiency, which is positive for volume. Overall, we expect that the increase in volume will outweigh the squeeze on profit margins for AI semiconductor producers.
AI is also leading the tide for other tech products. For other tech products, such as display, computer, smartphone and other Internet of things (IoT), we observe different trends in the Asia region. The smartphone market entered a stagnation phase, with growth muted to incremental upgrades and extended replacement cycles as consumers become more cautious about premium pricing without meaningful technological breakthroughs (China and Taiwan are key players in this market). Conversely, the IoT market is gaining momentum alongside the rise of AI, encompassing displays, audio products, edge computing, and arm-based PCs. Asia’s other tech landscape is recently being defined by IoT-driven industrial transformation and AI-enabled devices, with most EM Asian countries holding shares in this market.
Cautiously optimistic amid tariff uncertainty. We expect Asia’s manufacturing sector will continue to benefit from the rise of AI and its expanding applications. While traditional power houses will directly benefit from AI semiconductor demand, other countries may enjoy the demand cascade to AI peripheral products. That said, tariffs are a key risk to watch. Although semiconductors are currently exempted from U.S. tariffs, the sector is likely to receive tariffs in the near future. Given the extensive interconnections between the U.S. and most Asian countries in the global semiconductor supply chains, assessing the tariff impact on Asia tech sectors will largely depend on their design and implementation.