Will AI transformthe way weall do business?
AI (Artificial Intelligence) is one of the most important drivers ofgrowth within the ICT (Information and Communications Technology)
industry. This is no small thing as ICT is currently enjoying one of thefastest growth trajectories in the world. The influence of AI on industry
growth can be seen in the increased demand for AI in a wide rangeof applications. However, its impact also stretches far beyond this,with many businesses and segments experiencing an uptick in sales
or demand because of their use of AI.
As the influence of AI is now being felt further beyond the walls of computing labs than everbefore, we wanted to look more closely at the areas where AI’s effect might be felt mostkeenly. How is AI driving rapid growth within the electronics and ICT industries? How is AI
enhancing manufacturing processes? What risks and challenges could be posed by the riseof AI and how vulnerable is it to factors such as geopolitics and international trade relations?

Global output growth rates IT programming, consultancy, & information services%
64

5.5

5.8

5.3

2025

202620274.0202024
Source: Oxford Economics / Atradius.

How important is AI in the development of computer chips
for specialist applications?
The ICT industry and AI are inextricably linked. This is especiallyapparent in the design and manufacture of specialised
semiconductors. As AI’s generative capabilities grow, so does
the need for faster, more efficient computer chips to support
AI’s need for greater computing power. High-end processing
chips are set to improve rapidly, enabling advancements
in computing and processing power. Therefore electroniccomponents and boards, which includes semiconductors,
is expected to be one of the fastest growing sectors in thecoming years.
What is the fastest and most efficient way to develop such
AI chips? According to computing giants including Google andNvidia, the answer is through the use of artificial intelligenceitself. Nvidia’s ‘superchips’, the H100 and more recent upgrade
H200, are sought after for their ability to accelerate theperformance of computing products and support the demandsof generative AI.

What is AI and GenAI and why are they appearing on
boardroom agendas right now?
It makes sense to start with a solid understanding of what
AI is. An acronym for Artificial Intelligence, AI simply refers
to a computer’s ability to perform cognitive functions thatcould previously only be done by humans. For example,
AI is increasingly used in diagnostics applications wherepreviously a doctor would be needed to read a scan. Today,
an AI application can be ‘taught’ to see the signs a doctor may
be looking for and identify these with a speed that a humanwould not be able to match.

What’s more computer companies are increasingly producing
their own AI chips. Google DeepMind uses AI to design
specialised semiconductors. They point, in particular, to theefficiency savings AI brings where thousands of designs could
be developed by AI in one week, whereas one human engineer
could take several weeks to work on a single design. Amazon,Baidu, Meta, IBM, Huawei, Tesla and others have also reported
production of their own AI chips.

Electronic components & boards among the fastest
growing industrial sectors 2022-2035
Global: Long term growth prospects by sector (selected)
Motor Vehicles
Construction
Total (GDP)With transformative power available atthe click of a button, businesses throughout
the world are exploring the potential of AI.

Services
Chemicals & Pharmaceuticals
Telecommunications

Kyle Kong

Information & Communication
Air Transport

GenAI refers to Generative Artificial Intelligence and includes
any AI that is capable of generating new forms of creative
content including text, images, audio, code or video. ChatGPTand Bard (text) and DALL-E (images) are all examples of GenAI.
In the same way that AI can be found in healthcare settings
to read scans, AI can also be used in business applications.
These range from tracking and designing more efficient supply
chain journeys, to analysing enormous amounts of data andeven predicting business trends. With such transformative
power available at the click of a button, it’s no wonder thatbusinesses throughout the world are exploring the potentialthat AI could bring to their operations.

Consumer Electronics
Electronic Components & Boards
Domestic Appliances
Telecommunication Equipment
IT Programmering & Consultancy

0%

1%

2%

3%

4%

5%
Gross Value Added, CAGR: 2022-2035

Source: Oxford Economics/Haver Analytics.

What is Edge Computing and how important will it befor AI and businesses in the future?
Edge Computing describes data storage and computing at,
or close to, the site where it is produced, as opposed to being
sent to a data centre for processing. It has been developed
as an antidote to bandwidth issues that can impact real-time
applications where speed is an issue. As the use of AI grows,
so does the production of massive amounts of data, which
presents the risk of network disruption when bandwidths
begin to struggle with volume.
For example, a manufacturer may want to use AI with IoT(the Internet of Things) to monitor equipment performancein real time, detect issues and predict the need formaintenance to reduce downtime and increase productivity.
The manufacturer may choose to operate with an Edgesystem to minimise latency issues or network limitations.
As the use of AI increases in the future, the deploymentof Edge Computing solutions is also likely to grow and offer
further support to timely decision-making.
How is AI enhancing the functionality (and potentiallythe selling features) of current consumer electronics?
AI can be found in a wide array of consumer electronics andapplications from smart TVs and smartphones to GPS maps,
virtual assistants and even real-time language translators.
AI is often employed as the differentiator in an alreadycrowded and deeply competitive market.
The latest Samsung Galaxy phones have an AI-powered camerathat reduces shooting time in order to improve image quality.
Floor cleaning robots and automated lawnmowers already use
AI to support the identification of obstacles and to plan routes.
Virtual Assistants including the Amazon Alexa, Google Homeand Apple’s Siri use GenAI and natural language processing totune into human conversations and to respond to verbal cues.
For the most part, AI is being used in a bid to enhance
consumer experience, with the newest tech ranging fromproducts such as smartglasses that ‘see’ for the blind andself-driving cars.
Why is AI important to businesses selling servers, server
space and cloud solutions?
The growing demand for consumer products, changing work
habits, the growth of cloud-based technologies and other
AI applications has resulted in an explosion in demand forcloud services, data centres and more powerful servers. Thishas been further fuelled by companies seeking out specialised
servers, high performance computing hardware and private
cloud services to ensure security and business continuity in theevent of potential network disruption. According to McKinsey,
data centre power consumption in the US is expected to reach
35 gigawatts (GW) by 2030, up from 17 GW in 2022.
How does AI support businesses that manufacture
electronics?
AI is increasingly used to enhance manufacturing processes.
Product lifecycle management systems are being integrated
with AI in order to optimise product design and deliver
operational efficiencies. AI algorithms can quickly analyse vastquantities of data and note areas for design improvements andother productivity issues, such as the identification of skills
gaps or the prediction of maintenance needs.
AI connected sensors in a manufacturing plant can be uses
as part of an IoT system. This can gather real-time data on
everything from materials identification and tracking toenvironmental conditions such as temperature or humidity
and production scheduling. The AI system can then use thisdata to predict issues or identify areas for improvement.
What is the role of AI in international relations,international trade and geopolitics?
Advanced semiconductors are critical to the development
and operation of AI and have become increasingly central totalks on trade and international relations. The US president,
Joe Biden, has explicitly stated that US export controls
preventing the sale of advanced semiconductor chips toChina are to limit China’s ability to develop advanced militarysystems using AI. China rebuffs this and states the US ispoliticising trade and destabilising global supply chains.
While this could be seen as yet another example of ongoingtrade tensions between the US and China, it could pose a risk
to the sector. Japan and the Netherlands also currently haveexport controls in place that curb the supply of chips available
to the Chinese market. As semiconductor chips area vital component in the computers and electronic equipment,
prolonged or additional distortions of trade flows could
impede the information sector’s growth. The latest data fromthe China’s General Administration of Customs show that
China’s import of semiconductor equipment reached record
levels as it stockpiled equipment prior to the implementationof the export bans.

Edge Computing
solutions are likelyto grow alongside theincreased use of AI.
Kyle Kong

AI algorithms can quickly analyse vastquantities of data and note areas fordesign improvements.
Kyle Kong

What are the risks and potential challenges posed by
AI growth?
The US-based non-profit organisation Center for AI Safety(CAIS) groups potential AI risks into four categories: malicious
use, loss of control caused by the race to develop or adopt AI,
organisational risks such as catastrophic accidents causedby an organisation’s AI, rogue AIs that have drifted from their
original goals.

The proposed legislation is being met with caution by
the industry. Non-EU firms will need to consider whether
it is worth operating in the EU, with the risk being that if
they consider compliance to be too complex or costly they
may choose to ignore the EU market. Other commentators,
including the trade association Digital Europe, have expressed
concerns about the cost of compliance with funds spenton lawyers rather than on AI engineers.

The first laws designed to regulate AI are likely to beimplemented by the EU. A provisional deal has been agreed
by officials, including proposals to ban specific applications,and the European Parliament is voting on the Artificial
Intelligence Act in 2024. In addition, China, the US and theUK are all developing their own AI legislation. In 2023 almost
30 countries signed the Bletchley Agreement to establish
a shared understanding of the opportunities and risks posedby artificial intelligence.

Outside of potential safety and compliance risks, the riseof AI could pose additional risks to businesses, especiallyin the area of cost. AI systems are complex and require skills
and resources to develop, maintain and operate. It canbe costly to use AI to enhance manufacturing processes.
In addition, businesses that rely on AI could be at risk ofalgorithmic bias. If training data for machine learning is biased,
it can lead to biased result with areas such as quality control
at risk of missing things such as defects or contaminants.

Our Electronics / ICT Trade Sector Specialist
Kyle Kong
Atradius Senior Credit Risk Analyst
Taipei, Taiwan

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