June 2024

Industry trends
Electronics/ICT
Electronics/ICT will
be one of the fastest
growing sectors in
2024-2025

Global overview
We expect global electronics/ICT output
to grow by 5.3% in 2024 and by 6.3% in
2025, suggesting it will be one of the fastest
growing sectors over the next 18 months.
The primary drivers of demand will be
accelerating digitalisation, industrial
automation and the increased need foradvanced semiconductors, particularly
from new growth segments such as artificial
intelligence (AI) and electric vehicles (EV).

Computers and office equipment
Demand decreased in 2023, due to shifts inspending patterns away from goods towards
services, rising input costs, and a weakeconomic environment. We expect output
and sales to rebound in 2024 and 2025
as computing devices bought during the
pandemic are replaced.
Electronic components and boards
Production in this segment is predicted toincrease by about 9% annually in 2024 and2025. Semiconductor output is forecast to
grow 13.7% this year, driven by the AI boom.
Telecommunications equipment
We expect robust production and sales
growth at about 5% annually in 2024 and2025. Although demand for smartphones
has slowed somewhat in the face of market
saturation, the sector is buoyed by growthand upgrades to mobile and broadband
infrastructure, in particular for 5G.

Industry performance forecast
Europe1Asia and Oceania

Americas

Austria

Netherlands

Australia

Phillippines

BrazilBelgium

PolandChina

Singapore

CanadaCzech Republic

PortugalHong Kong

South Korea

MexicoDenmark

Slovakia

India

TaiwanUSA

FranceSpain

Indonesia

ThailandGermany

SwedenJapan

UAE

Hungary

Switzerland

Malaysia

VietnamIrelandTurkeyNew Zealand

Italy

UK

Excellent
The credit risk situationin the sector is strong /business performance in the
sector is strong compared toits long-term trend.
Good
The credit risk situationin the sector is benign /business performance in the
sector is above its long-term trend.
Fair
The credit risk situationin the sector is average /business performance in the
sector is stable.
Poor
The credit risk in the
sector is relatively high /business performance in the
sector is below its long-term trend.
Bleak
The credit risk in the
sector is poor / businessperformance in the sector is weakcompared to its long-term trend.

June 2024

Industry trends
Electronics/ICT
Electronics &computers output

2022

2023

2024*

2025*

5.3

6.3

5.2
1.2

GlobalAmericas

2.0

2.3

5.3
Asia-Pacific

4.3

3.3

6.7

7.7

4.4

Europe0.3

Computers &office items

Electronic
components/
boardsTelecoms
equipment

0.5
7.9

Global output
per subsector

2.8

Consumerelectronics

2023

-2.9

2024*

2025*

2026*

7.6

6.1

8.9

7.9

8.3

4.8

5.8

5.1

4.5

3.9

3.4

2.8

-0.4

4.1

-1.2

Year-on-year, % change /*forecast – Source: Oxford Economics

Strengths and growth drivers

Constraints and downside risks

High-tech expansion. Electronics/ICT is an innovative andtechnology-driven industry. In particular, the semiconductor
segment is highly value added and provides robust margins for
manufacturers.

Market saturation. In some advanced economies, the market
for certain ICT products (e.g., personal computers, tablets andsmartphones) is nearing saturation, which affects growth prospects.

Expanding semiconductor production. This is a strategic target in
the US, EU and Asia. Legislation has been passed recently to support
the growth of domestic production in all three areas.
Growth of digitalisation, automation, AI and electric vehicles.
Accelerating digitalisation, industrial automation, and increased
demand for advanced semiconductors from new growth segments
like artificial intelligence and EVs will all help the ICT industry
become one of the fastest growing sectors in manufacturing.

US-China tensions. Trade issues have spilled over to technology.
Both the Trump and Biden administrations have imposed
regulations to prevent Chinese companies from acquiring US
semiconductor manufacturing technologies and equipment.
Both sides perceive high-tech leadership as a strategic asset.
A further deterioration of the Sino-US relationship could negatively
affect global ICT/electronics supply chains.
Growing ‘chip nationalism’. In addition to technological divergences(e.g. in 5G deployment), chip nationalism could lead to inefficient
production processes and increased production costs, with impacts
on sector productivity and profitability.
Taiwan issue. Given the global importance of Taiwanese
semiconductor production an escalation of the current tensions
in the Taiwan Strait could severely affect chip supply for chipconsuming ICT segments and other industries across the world.

2June 2024

Electronics/ICT outlook
AmericasElectronics & computers output

2022

2023

2024*

2025*

Brazil

-1.9

-10.4

-12.9

2.4

Canada

8.9

-7.4

-0.9

3.9

Mexico

13.7

1.1

6.1

3.4

CanadaUnited States

-0.1

3.3

4.7

3.4

MexicoYear-on-year, % change /*forecast – Source: Oxford Economics

We expect US electronics and computer
production to increase by 4.7% in 2024 andby 3.4% in 2025. Sales are forecast to grow by
4.2% and 3.5% respectively.
The surge is being driven by the electronic
components and boards subsector, which
we expect to expand by 9.8% this year andby 7.2% in 2025. Cloud computing andstorage, automated data processing, andcybersecurity solutions, such as colocation
services, are increasingly becoming priorities
for businesses.
US production of telecommunications
equipment has grown strongly in recent years
due to upgrades to broadband infrastructure
and to 5G mobile systems. We expect thissegment to expand 7% in 2024, but this paceof growth is unlikely to be sustained in themedium term.
Weaker investment spending and higher
credit costs still weigh on precision
instruments, the largest electronics subsector
in the US. Production in this segment is
expected to contract 0.8% in 2024 and to growonly 0.9% in 2025.

3

BrazilUSA
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.

USA
Solid growth driven by semiconductor output
and sales

Industry performance forecast

Major impact of the CHIPS and Science Act
In a bid to lower the country’s dependency
on Taiwan and South Korea for cutting-edge,
high-tech chips, the government passed theCHIPS and Science Act in 2022. The Act is
supported by USD 40 billion in subsidies anda 25% tax credit to promote manufacturing athome, as well as USD 13 billion of investment
in chip research.
So far more than USD 200 billion investment
in new US chip making facilities have beenannounced. This includes investments byseveral global players like Samsung, Intel and
TSMC (Taiwan Semiconductor Manufacturing
Company), despite the fact that capital
expenditure on new factories and operating
expenses in the US are likely to be higher
than in Asia. That said, the government
measures will drive US chip production
capacity in the medium and long term.

Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

June 2024

Electronics/ICT outlook
Asia PacificElectronics & computers output

2022

2023

2024*

2025*

China

7.2

4.9

6.2

7.9

Japan

-4.8

-5.6

3.6

7.5

South Korea

6.0

-1.4

12.7

7.6

Taiwan

7.0

-8.2

8.6

8.0

Year-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Australia
China
Hong Kong
India
Indonesia

Japan / South Korea / Taiwan

China

A good long-term outlook, but US-China
frictions pose downside risks

High-tech is a key sector for thegovernment´s economic policy

High-tech goods’ growth will be robustin these East Asian markets in 2024 and2025 (see chart above). Both South Korea
and Taiwan benefit from the current highdemand for semiconductors. Japan has madea structural shift away from producing lowervalue items such as consumer electronics, infavour of chips and precision instruments.

China produces more than half of theworld’s electronic goods, computers andtelecommunications, and the industry’s
fortunes inevitably reflect global demand.

Semiconductor production is a strategic
priority in East Asia, with legislation andsubsidies used to support growth andreshoring. This includes the South Korean
K-Chips Act, the Taiwan Chips Act, andJapanese subsidies for semiconductor joint
ventures.
The long-term outlook is good. All threemarkets should benefit from increased
demand for semiconductors and ICT products
due to a global trend towards increased
automation and digitalisation, as well as
the growing production of electric vehicles.
That said, additional US restrictions on
advanced chip exports to China could curtailsales and profits of East Asian high-tech
producers. South Korea exports about halfof its memory chips to China. Taiwanese andKorean producers have heavily invested in
manufacturing facilities in China.

4

We expect Chinese electronics and computer
production to increase by 6.2% in 2024
and by 7.9% in 2025. Increasing worldwide
demand for computers and office items, aswell as upgrades to telecommunications
equipment, should benefit China as themain global manufacturer of such goods.
Chinese production of electronics andboards (including semiconductors) is
forecast to grow by 9.5% this year and by
7.4% in 2025. The high-tech sector is a key
area of the government´s targeted industrial
strategy, with subsidies of about USD 150
billion spent over the past ten years. Beijing
has long emphasised the importance of selfsufficiency in chip production.
Those efforts have accelerated since October
2022, when the US introduced sanctions on
high-tech exports to China. These include
licensing requirements on the sale ofadvanced chips, software, and a wide rangeof semiconductor manufacturing equipmentused to produce advanced chips. Despite
the sanctions and a technological backlog
in advanced chip production it seems
that China is nevertheless moving up the
chipmaking value chain.

Japan
Malaysia
New ZealandPhillippines
Singapore
South Korea
TaiwanThailand
UAE
Vietnam
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

June 2024

Electronics/ICT outlook
EuropeElectronics & computers output

2022

2023

2024*

2025*

France

5.9

7.7

-1.7

0.8

Germany

6.0

5.3

-0.7

2.0

Italy

6.8

1.8

2.1

2.9

Belgium

United Kingdom

0.3

4.3

-0.2

1.3

Czech RepublicYear-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Austria

Denmark
FranceEuropeGermany

Lower demand from automotive and otherbuyer sectors weighs on the industry

Major investments in chip production
underway, but there are limits

We forecast 2024 eurozone and UK
production of electronics and computers
to contract by 0.4% and 0.2% respectively,
as high interest rates weigh on privateand business investments. The electronic
components segment is suffering from
subdued chip demand from the European
automotive industry this year. Due to a large
dependence from Chinese intermediate
imports, supply chain disruptions in the Red
Sea remain a downside risk for the sector.

Until recently, Europe has not produced
any cutting-edge chips, focusing insteadon rather low-tech semiconductors for
manufacturing, in particular for automotive.
In common with Asia and the US, Europe
has passed legislation in support of the local
semiconductor industry and the productionof high-end chips. The EU Chips Act is set toinvest EUR 43 billion in local semiconductor
production and research, with the aim oflowering dependence on imports from Asiaand achieving a 20% share of global chipproduction by 2030.

A gradual recovery of the industry is
expected to take place towards the end of thisyear, with high tech-goods production in the
eurozone and the UK to increase by 2.8% and1.3% in 2025. This growth should be driven byeasing financial conditions and a rebound of
key buyer sectors.

As with the US, large manufacturers are
already seeking investment in European
plants, including Intel, TSMC, Bosch, Infineon
and NXP. However, current estimates suggest
the EU´s target of 20% of global production
by 2030 is likely to be beyond reach,constrained by operating and labour costs
and limits on subsidies.

Hungary
Ireland
Italy
Netherlands
PolandPortugal
Slovakia
Spain
SwedenSwitzerland
TurkeyUK
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

5June 2024

Atradius
David Ricardostraat 1 · 1066 JS Amsterdam
P.O. box 8982 · 1006 JD Amsterdam
The Netherlands
Phone: +31 (0)20 - 553 91 11
info@atradius.com
www.atradius.com

Copyright © Atradius N.V. 2024
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