US tech bans, pandemic no match for Asia’s electronics rebound

The electronics sector has found a way to thrive amid the global pandemic, with 5G demand helping the industry remain a rare catalyst for Asian factories.

South Korean computer sales surged 107% in August and semiconductor shipments grew for a third month in the past four, even as smartphone sales declined and overall exports fell 9.9% from a year earlier, figures out Tuesday showed.

Taiwan’s manufacturing output rose 2.6% in July, while production of computers and integrated circuits climbed by double digits. Shipments of electronics products from Singapore rose in July for a third straight month.

The latest data bolster forecasts that this year’s electronics rebound will persist, even as a U.S. ban on Huawei Technologies Co., further U.S.-China trade tensions and an eventual tapering of demand for work-from-home equipment present obstacles for the industry.

Relentless demand for 5G-related applications, including infrastructure and smartphones, is poised to keep electronics production humming as other output struggles to recover from the pandemic. Even the latest technology bans on Huawei look to be just a stumbling block.

“It’s kind of a little bit of a bump,” Rajan Rajgopal, chief executive officer of Singapore-based DenseLight Semiconductors Pte., said in an Aug. 28 interview.

Two areas of business especially have been booming since before the pandemic: data centers and 5G infrastructure, said Rajgopal, who’s worked in semiconductors for about 25 years. China accounts for about half of DenseLight’s customer base and could take an increasing share as it builds out its next-generation wireless infrastructure across the country—boosting demand for semiconductors that go into devices as diverse as street cameras and oil-pipeline sensors.

Global semiconductor industry revenue is set to slip by only 0.9% this year to $415.4 billion amid pandemic-related disruptions, according to Gartner Inc. estimates.

Still, significant risk factors are keeping electronics watchers on guard. U.S. President Donald Trump’s potential re-election in November could mean more headaches for Asian supply chains, while it’s unclear how his rival for the White House, former Vice President Joe Biden, would alter U.S. strategy toward China. And retailers across sectors are bracing for a holiday season that could disappoint if government stimulus wears off and labor markets worsen.

For now, though, companies expect the electronics boom to overcome the risks—with Taiwanese firms seeing themselves particularly well-placed to ride out the storm. Industry giant Taiwan Semiconductor Manufacturing Co. is charting a “PC resurgence” amid Covid-19, C.C. Tsai, senior director of the company’s Asia-Pacific business, said in a video for a company symposium Aug. 25.

Despite concerns that increased work-from-home orders for things like laptops and webcams would prove temporary, computer demand “continues to remain robust,” and many consumers spending more time at home are also upgrading their television sets, Chairman Fang Leuh of Vanguard International Semiconductor Corp., a TSMC affiliate that specializes in power management chips and display driver chips, told reporters Aug. 29.

That matches the read of Quanta Computer Inc., which makes Apple Inc. MacBooks, HP Inc. notebooks and servers for Amazon.com Inc.’s AWS and Google. Elton Yang, chief financial officer of Taiwan-based Quanta, says notebook shipments are expected to grow by double digits in the third quarter.

“Strong orders from our customers confirm shelter-in-place demand is long-term,” Quanta Chairman Barry Lam told reporters Aug. 13. “We will create more products for the shelter-in-place economy to optimize our profitability. This is a big change. We will grab it and gain better opportunities.”

Industry executives acknowledge greater uncertainties around the trade war, U.S. elections and Covid-19, while taking a longer view on the prospects for electronics.

Apple, for example, has asked suppliers to build at least 75 million 5G iPhones for later this year—roughly in line with last year’s launch—a sign that demand for the company’s most important product is holding up despite the pandemic and recession.

Vanguard’s Fang emphasized very strong demand into 2021 for the type of semiconductors his company makes, aided by rollout of 5G technologies. And even if Trump wins another four-year term, complicating DenseLight’s China business, Rajgopal sees a brighter outlook.

“The electronics industry is a lot more resilient than eight years,” he said.