As researchers highlight the US and Europe's efforts to diversify risks in security-related sectors, analysts believe that Asia-Pacific emerging markets would benefit from the ongoing supply chain decoupling.
The decoupling between the US and China's production of intermediate goods was recently explored during an online event by Steven Cochrane, chief Asia-Pacific economist for Moody's Analytics. He clarified that the growth of the semiconductor business in the US and Europe is being driven by incentives rather than national policies.
Due to their abundant labour resources, Cochrane thinks that the Asia-Pacific economy, notably India and Southeast Asia, can benefit from this de-risking or "China plus one" mindset.
As per Moody's Analytics data, electronics exports from Taiwan and Southeast Asia have been declining since late 2022, with notable declines in Singapore and South Korea. In the first quarter of this year, the percentage of domestic electronics exported was under 20%.
Denise Cheok added, an economist at Moody's Analytics, this correction is the result of high export prices that peaked in 2021 and 2022 as well as a slowdown in the demand-driven main economies of China, the US, and the EU.
“We are still looking for a bottom for this current downturn. We do not see the turnaround just yet, as it is expected to extend perhaps to the end of the year before demand slowly starts to pick up in 2024, where we forecast there will be a recovery in the global economy.”
Cheok stressed that technological improvements in the areas of artificial intelligence, electric vehicles, and other fields continue to bolster the tech sector's medium- and long-term prospects, which are still quite promising.