Deficit and market shift in electronics: opportunities for investment

What is the market for electronic stocks growing and why? Which country is now being invested in instead of China? More about the current trends and huge issues of investment in electronic components stocks in this article.

Sustainable investment market

The market of semiconductor microcircuits is a nice piece of cake for any investor. The industry with a volume of several hundred billion dollars has also “shot up” due to the increase in the number of electric cars and the increase in the share of electronics in ordinary cars. Thanks to Ford, General Motors, Volkswagen and other brands, the demand for electric cars has significantly increased.

In addition to internal disputes, automotive companies also compete with other industries: cloud service providers and component manufacturers such as Amazon, Apple, Microsoft, and HP. There is also growing demand among manufacturers of TVs and equipment for the smart home. At the same time, China is increasing its imports of wireless devices in preparation for the second phase of the trade war with the United States.

At present, the market of power suppliers is completely controlled by several powerful players who have been holding the positions for decades: the two Koreas Samsung Electronics and SK Hynis, Taiwanese TSMC and Dutch ASML Holding. The only imaginable competitor of these fantastic four is Interl, which will be able to strengthen its positions only due to widespread investment and government support.

Sudden deficit – an increase in investor income

No modern household electrical appliance can do without microcircuits. These are the small parts that make the electronics work. To produce these circuit breakers, high-tech production and billions of dollars in investments are required.

In 2020, the world faced a pandemic and forced digitalization of all spheres of life, and the demand for electronics has increased significantly. Therefore, manufacturers needed many chips.

In 2020, more than 13% more PCs were supplied to the market than in 2019.

Statistical data on market development

●     The smartphone market expects the implementation of 5G technology, so the number of those who want to update their gadgets will increase. According to international research company IDC, in 2021 the smartphone market will grow by 5.5%.

●     The pandemic has increased the number of Internet users. This means that the pressure on server equipment is growing, and companies must expand their data centers. Server sales in 2020 grew by 2.2% to $22.6 billion.

●     In addition, the demand for video cards for computers grew against the background of the trend towards cryptocurrencies and the popularization of mining.

●     Also, USA export controls forced Chinese electronics manufacturers to order more chips and replenish reserves in case of repeated problems with sanctions.

●     This further fueled the excitement, through which even cheaper components became more expensive. According to chip trading companies, voltage regulators, which previously cost 50 cents, are now selling for $70.

So, even if the equipment manufacturer receives the necessary components, the value of the finished product will be higher than before.

How companies react to the deficit

For example, as part of the fight against the global deficit of electronic components, which is continuing, Bosch plans to further expand its production of fuel wafers in Reutlingen.

About 250 billion euro will be invested in the creation of new production facilities and the necessary conditions for work until 2025. This allows Bosch to satisfy the constant demand for chips, which are used in the automotive industry and IoT add-ons.

The use of piece-by-piece intelligence in combination with the connectivity options enabled us to continuously improve our data-driven production, thereby producing more and better chips.

Bosch also uses Al for improved material treatment processes. Thanks to the high level of automation, this state-of-the-art production facility in Reutlingen will secure the future of the plant and save jobs for the employees.

Electronic components investments: not China alone

China has become expensive and uninteresting for companies. Gainy gives reasons for relocating production from China to other countries:

●     The first reason was the rising cost of labor in China. No matter how hard the government tried to streamline the yuan exchange rate, Chinese factories are no longer the cheapest option in the world. Vietnam, Malaysia, and other Asia are cheaper.н

●     Some companies intend to return to Taiwan. Unlike other Chinese competitors, this location is expensive, but manufacturers find it interesting because the management is more Western-oriented, some components are produced here and there is a production culture and well-organized logistics. Taiwan today has already become more expensive than China by about 10%, and prices in the region will obviously increase due to consumption growth. However, compared to other locations, Taiwan seems to be a small location, which will not be able to accommodate all those who want it. And the prices are steep.

●     Although India is not included in the world’s top spots as the best place for electronics manufacturing, due to the legislation and the large population, the country has also become a destination for electronics factories. India has special economic zones focused on export development. Two-thirds of the companies in these zones are in IT and electronics manufacturing.

Companies that export production to other countries:

●     Google is moving the production of motherboards to Taiwan, and Nest is likely to move to Taiwan, Malaysia, or Thailand. The Pixel smartphones, according to the Nikkei Asian Review, will move to the former Nokia factory.

●     Nintendo and TCL are considering Vietnam as additional production facilities for game consoles and TV sets.

●     Quanta Computer and Inventec, manufacturers of server equipment, are looking at production facilities in Taiwan.

●     For Lenovo Group, Acer, and Asustek Computer, the American market is no less important, and these companies are considering other locations for relocation. Sony and Microsoft also plan to leave China (although Microsoft’s plans are currently quite vague, the company denies information about the move).

●     General Secretary of the China Overseas Development Association (CODA) He Zhenwei said that small and medium-sized enterprises in China are also considering other countries to produce goods for the USA market.

Conclusion

 The main investment opportunities will open to you with a detailed study of the market, its trends in production, and location. Massive digitalization gives a volatile market to large companies for investment flows, and investors in electronic components stocks the right to participate in financial development.