KUALA LUMPUR, Sept 2 — Asia will retain its leadership in chip manufacturing over the next five years, supported by cost advantages, established ecosystems and deep technical expertise, said Moody’s Ratings today.
It said geopolitical tensions and economic uncertainty were prompting Asian semiconductor companies to diversify geographically.
“Asia currently commands over 75 per cent of overall chipmaking capacity, spanning wafer fabrication for logic, memory, and DAO chips — including discretes, analogue, optoelectronics and sensors — as well as key material supplies,” Moody’s Ratings said in a note today.
It noted that South and Southeast Asian economies were emerging as back-end hubs, but technical gaps constrain their ability to capture greater economic value.
Moody’s Ratings said Malaysia leads in assembly, testing and packaging, while India is expanding in fabrication and design.
“Semiconductors will drive export growth for these economies, but advancement into higher-value segments is held back by weak research and development, intellectual property, talent and infrastructure in most countries.
“Progress will depend on state support, innovation and global partnerships,” it added.
Moody’s Ratings said Taiwan, Korea and Japan would retain their leadership in advanced chipmaking despite rising overseas investment and China’s growth.
“While China’s shift toward domestic suppliers is redirecting some demand away, geographical diversification of exports and investments into emerging Asian economies will likely offset the impact,” it added.
It said pandemic-era shortages exposed vulnerabilities in the region’s concentrated supply chain, while persistent geopolitical tensions, particularly between the United States (US) and China, have intensified calls for diversification.
Moody’s Rating pointed out that Asia’s competitive edge lies in cost advantages, deep ecosystem integration and skilled labour.
“For example, labour costs in the US are roughly two to four times higher than in Asia. Manufacturing wafers in the US is around 50 per cent more costly than in Taiwan because of higher setup and operational expenses, including labour, land and utilities,” it added.
Beyond wages, Moody’s Ratings said Asian fabrication plants also have significantly lower utility and infrastructure costs; subsidies for utilities can reach up to 30 per cent in Taiwan and 70 per cent in China, while comparable support is rare in Western markets.
It pointed out that scaling semiconductor operations outside Asia remains commercially challenging because of high capital intensity and less competitive cost structures.
“Replicating a self-sufficient local supply chain with full-scale capacity is estimated to require US$1 trillion (US$1=RM4.22) in incremental upfront investment, according to Boston Consulting Group (BCG), which could raise chip prices by 35 per cent-65 per cent with costs ultimately passed on to consumers,” said Moody’s Ratings.
