Photo from Unsplash by Alexandre Debiève.
Asian tech manufacturers to benefit on stock piling next year, analyst says
AI, digitalization seen propping up the tech sector next year and beyond.
Tech manufacturers in Asia are well-positioned to remain resilient in 2024 as factories are seen stocking up on inventories to end a rather difficult year, according to JP Morgan Asset Management.
In a 28 November note, Adrian Tong and Raisah Rasid, global market strategists at the asset manager, noted how tech-related production slowed dramatically this year from its peak in 2022 on the back of a global chip supply chain glut.
Green shoots are starting to emerge, however, as the tech inventory destocking trend “appears to be behind us,” and with factories reporting inventory adjustments in the latter part of 2023.
“Following the inventory overhang, there are signs of inventory accumulation, pointing to a more constructive near-term outlook by Asian tech manufacturers,” Tong and Rasid said in the note. “Looking ahead, the tech-related sector will continue to support regional growth even as domestic demand could see some pullback into next year.”
Asia’s tech industrial output by some of the biggest producers in the region has surprisingly picked up in recent months especially in the semiconductor sector, they said.
For the entire tech sector, the JP Morgan Asset Management analysts predicted that the tech cycle may have already reached its bottom and resilient demand for consumer tech goods like new smartphone launches and PC restocking will continue to fuel the segment’s growth over the near term.
“Our view of a more prolonged upturn in the tech cycle into next year, however, is premised on the ongoing structural shifts fueled by AI (artificial intelligence) and digitalization,” they said.
“With an existing network of high-end foundry technology, Asian tech giants are likely to benefit from expansions in AI and automation over the medium-term,” they added.
Meanwhile, Tong and Rasid identified the US-led AI chip export restrictions to China as a major near term risk for Asia’s tech industry.
