13 Dec 2023 -

Navigating the tides of change: AI and HPC fuelling industrial revival


In the ever-evolving world of the electronics industry, a pivotal transformation is underway, as recent data unveiled in the Taipei Times. The industrial production index, a vital barometer of industrial activity, exhibited a 2.32 percent year-on-year decline to 92.29 last month. This marked the slowest pace of reduction in about a year, energised significantly by the burgeoning demand for artificial intelligence (AI) chips, servers, and high-performance computing (HPC) devices. This trend is a beacon of optimism in an industry witnessing its 17th consecutive month of downturn.

The Ministry of Economic Affairs attributed this gradual improvement to the robust AI supply chain, projecting a hopeful cessation of the annual decline soon. Deputy Director-General Huang Wei-jie of the Department of Statistics indicated a potential swing back to growth on an annual basis by January next year, citing a lower comparison basis due to the Lunar New Year holiday.

Key indicators are signaling a notable upturn. The semiconductor output, for instance, has reversed a 13-month decline, achieving a 0.37 percent growth last month. The demand for 12-inch wafers, crucial for AI chips and HPC devices, emerged as a highlight, along with the rising demand for large TV panels.

This resurgence in semiconductor output has had a cascading effect, pushing the overall production of electronic components, comprising mainly semiconductors and flat panels, close to the breakeven point. These components constitute about half of the total manufacturing output, underscoring their significance.

However, the scenario isn’t uniformly optimistic. The Ministry forecasts a potential drop in manufacturing production this month, with traditional segments like machine tools and equipment still struggling amid a sluggish macroeconomic recovery. Last year’s higher production levels, aimed at addressing supply constraints, have led to an inventory glut as demand waned.

In contrast, the production of computers and optical components surged by 12.51 percent annually, propelled by increasing demand for servers, cloud-based applications, and camera lenses, notably from Apple Inc and Chinese brands like Huawei Technology Co and Xiaomi Corp.

The basic metals sector, predominantly steel, experienced a 4.6 percent decline as mills adjusted production in response to weak demand. The petrochemical sector also saw a downturn, with a 5.18 percent year-on-year fall due to an inventory-driven down cycle.

Meanwhile, machine tools output plummeted by 17.64 percent, reflecting businesses’ hesitation to invest in new manufacturing equipment amidst economic uncertainties. On a brighter note, the production of automotive-related products increased by 2.37 percent, thanks to new vehicle launches and an improved chip supply.

In summary, while the electronics industry navigates through a period of fluctuation, the increasing demand for AI and HPC is emerging as a key driver for recovery, potentially heralding a new phase of growth and technological advancement.

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