ICT competitiveness at risk from technology divergences
The Information and Communication Technologies (ICT) industry will be one of the fastest growing manufacturing sectors globally in the coming years. According to the latest report released by Crédito y Caución, the upturn in the production of high-tech goods will reach 4% in 2024 and 7% in 2025.
Accelerating digitalisation, industrial automation and increased demand for advanced semiconductors, particularly in new growth segments such as artificial intelligence and electric vehicles, will be the main drivers of growth. However, the credit insurer points to some downside risks to the sector's competitiveness, especially linked to trade fragmentation.
Semiconductor production has become a strategic priority for Asia, Europe and the US, which will drive investment in the sector. However, there is a risk that nations seeking to develop their own semiconductor industries will lead to technological divergence, inefficient production processes and increases in production costs that will affect ICT productivity and profitability.
One of the main risks ahead is the evolution of trade relations between China and the United States. Further deterioration could negatively affect supply chains and industry productivity, as well as lead to technology divergences, such as in the area of 5G deployment.
The US has called for the Chip 4 alliance to coordinate supply chains between the US, Japan, South Korea and Taiwan and counter China's growing influence. However, it will not be an easy agreement to implement. While the four countries share a common interest in fostering a stable supply chain, they are also in competition with each other. Taiwan and South Korea produce the world's most advanced chips and are likely to be reluctant to share their sensitive technology and give up their competitive advantage. Moreover, China is an important trading partner in the region and its neighbours are likely to want to maintain trade relations.
The escalation of the current geopolitical tensions between Taiwan and China could also seriously affect the supply of leading-edge semiconductors. Taiwan's strategic importance for the global semiconductor industry is particularly critical. No country can surpass its current dominance in high-end chip production. All global industries, from consumer electronics to automotive to armaments, rely heavily on Taiwan for chip manufacturing. Any disruption in Taiwan's chip production could cause a catastrophic domino effect in many industries and countries around the world.