[Practical Finance] Global Supply Chain Restructuring Movements... Focus on Semiconductors, Waste Batteries, and Robots

Government Direct Investment Expansion Sectors Lead the Market

Semiconductors Are Key to Supply Chain Restructuring
US Chip4 Alliance Formation... China’s Localization Strategy
Domestic Used Battery Recycling Response Expands with US IRA
Robot Theme Also Highlights Reshoring, Smart Factory Demand Increases

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] ‘Semiconductors, Robots, Used Batteries’

The securities industry has identified the semiconductor, robot, and used battery industries as key themes for next year. These themes have emerged from goals of supply chain restructuring driven by economic nationalism and securing new growth engines differentiated from other countries. The U.S. Biden administration has clearly stated its intention to actively invest in manufacturing and advanced technology sectors to solidify its status as a global hegemon. Additionally, the European Union (Raw Materials Act) and China (Dongshu Xishan Project) are also intensifying investments in supply chains to accelerate efforts to protect their domestic industries.

KB Securities researcher Eun-taek Lee stated on the 2nd, "The focus is shifting from globalization to deglobalization (regionalization), and future economic cycles will be led by sectors where governments directly increase investments." He added, "Attention should be paid to the possibility of excessive overlapping investments as supply chain construction is promoted regionally."

The semiconductor industry is at the core of supply chain restructuring. The U.S. is pressuring China by imposing export restrictions on semiconductor design technology and equipment. To this end, it has formed the ‘Chip 4’ alliance with South Korea, Taiwan, and Japan to strengthen its leadership in the semiconductor industry. Meanwhile, China is pursuing a semiconductor localization strategy and plans to foster its domestic semiconductor industry. In particular, it is carrying out the ‘Dongshu Xishan’ project, which involves transferring data from the economically advanced eastern region to the western region. The key is the expansion of large-scale data centers.

KB Securities researcher Hainhwan Ha said, "As overlapping investments occur in each country, demand for materials, components, and equipment is expected to explode." He analyzed, "Although IT demand for smartphones and laptops is expected to be sluggish due to recession concerns, semiconductor demand will grow exponentially if large-scale investments led by governments and public-private sectors continue in data centers and facilities."

The domestic used battery industry, which led the market this year, is also expected to become a leading sector next year due to changes in the international situation. Under the Inflation Reduction Act (IRA), the U.S. stipulates that electric vehicle subsidies require sourcing raw materials such as lithium and nickel from countries with which it has free trade agreements (FTA). However, South Korean companies procure over 80% of secondary battery raw materials from China, necessitating a response through used battery recycling. Supported by this interest, secondary battery recycling companies Seongil Hightech and Saevitchem, which went public this year, have risen 168% and 260% respectively compared to their IPO prices as of the 31st of last month, showing an upward trend.

The used battery industry is also a theme with growth potential alongside the global electric vehicle market. The global market size for electric vehicle battery recycling is expected to grow from about 400 billion KRW in 2020 to 87 trillion KRW by 2040.

Cape Investment & Securities researcher Jinhyung Park analyzed, "The used battery recycling process is compressed into collection and inspection, remanufacturing, pretreatment, and material recovery. As the market grows, new business models will emerge for each process." He added, "Various business models will arise, including eco-friendly process development, expansion of recycled material scope, and technologies to reduce inspection time for residual performance of used batteries."

Regarding the robot theme, it has recently gained attention as companies strengthen reshoring efforts in response to U.S. supply chain restructuring moves such as the IRA. From the perspective of companies, it is not easy to pay the sharply increased wages of workers due to COVID-19, so demand for smart factories including robots that can improve labor efficiency and increase productivity is expected to surge, according to experts.

Domestic companies are expected to attract attention in the robot market. They have already invested in the robot industry early to respond to the rapid decline in the working-age population and to secure new growth engines. Korea Investment & Securities researcher Daejun Kim said, "Most domestic robot companies are listed on KOSDAQ or unlisted, but attention should be paid to the possibility of large corporations acquiring or investing in shares of robot companies." He explained, "Previously, LG Electronics designated robots as a new business and secured shares in Robostar and Robotis."