SINGAPORE: Various economies in Asia have been lifted up by a tech boom in recent years. Taiwan has become a semiconductor superpower, South Korea has been boosted by memory chips and electronics, Singapore is a tech hub with a huge AI push, and China’s electric vehicles and digital platforms have been popular across the globe.
With the war in the Middle East depriving the world of between 10 million and 20 million barrels of oil every day, these Asian economies may run into trouble, especially in the event of a prolonged conflict.
Countries in Asia and the Pacific have been the canary in the coal mine for the energy crisis, since they are heavily dependent on oil and gas from the Middle East, but the great demand for AI may be some economies’ saving grace.
Asia’s tech giants
According to a report from the United Nations, the global market is expected to grow 25-fold from 2023 to 2033, when it is likely to reach US$4.8 trillion (S$6.11 trillion). Moreover, an estimate from Morgan Stanley says that AI infrastructure spending may surpass US$3 trillion (S$3.81 trillion) through 2028.
For Asia’s tech giants, such as Taiwan, South Korea, and Singapore, the current challenges are manifold, given their heavy energy imports, export dependence, and exposure to shipping chokepoints.
China is the largest oil importer in the world, which makes the price and supply of oil extremely important. However, in comparison to other economies, China is in a better position, given the country’s higher domestic energy production, large strategic reserves, and huge coal capacity. Additionally, China’s rapid EV adoption and diversified suppliers tend to work in its favour.
AI as the winning edge
A recent CNN report pointed out that despite the challenges faced by Asia’s tech giants, the amount of money poured into AI investments outweighs current threats.
“Semiconductor companies will be able to pass on these additional costs to the end customers. The supply demand for semiconductors is very skewed, so having the product is more important, and they have very strong pricing power,” the report quoted Jason Lui, head of Asia-Pacific equity and derivative strategy at French bank BNP Paribas, as saying.
The Asia-Pacific tech research coordinator at Bank of America, Simon Woo, meanwhile, pointed out that if key US tech companies maintain their AI investing, Asian tech companies will continue to do well.
The report pointed out, however, that economies in Asia with fewer resources will suffer disproportionately from the energy crisis, creating a widening gap between countries. /TISG
Read also: Asia hit hardest by energy crisis but could benefit in the long run
This article (AI could become Asia’s buffer against deepening energy crisis, analysts say) first appeared on The Independent Singapore News.
