From Eastern Asia to Europe to chip design
This week, we travel from East Asia to Russia, Germany, UK and finally to US on new chip designs being researched to meet exponential computing demands from AI.
Economic outlook for East Asia
In a recent outlook published by the World Bank, it was reported that the economic outlook for East Asia region will be expanding at a rate which will be the lowest rates in last 50 years.
East Asian economy is facing one of its worst growth rates in half a century, according to a World Bank report. China’s economic slowdown is a major factor affecting the region.
China’s growth rate is expected to be 4.4% in 2024, lower than the previous estimate of 4.8% in April 2023 by the World Bank.
Exports of goods have declined sharply in Indonesia, Malaysia, China and Vietnam compared to the same period last year, especially after US passed the Chips law in 2022.
High debt levels among households, businesses and governments have reduced the potential for growth.
US sanctions on electronics and machinery imports from China and some south-east Asian countries have hurt their export sectors.
Vietnam, which has the largest nickel reserves in the world and is a major exporter to the US, is seeking better trade terms from the US after its shipments dropped 19.1% in the first eight months of this year.
Russia turning on war-related industry to full speed
Industries providing goods for the military are expected to increase their output by almost a third in 2023, according to government forecasts for the next three years, as reported by Bloomberg.
The government forecasts a 30% increase in output for industries supplying military goods in 2023.
Electronics, computers and other products for fighter aircrafts and rocket engines are expected to grow by 34% year-on-year.
Industrial production surpassed Bloomberg’s estimates by 0.9% in August, reaching 5.4% growth.
The production category covering combat vehicles, aircraft and ships is projected to rise by more than 26% this year.
Finished metal goods, which include arms and ammunition, are likely to expand by almost 28%.
Russia plans to increase its defense spending to 6% of GDP in 2024, up from 3.9% this year. The underlying assumption is that the war conditions will persist for the next three years.
Germany faltering to push chip-making plan
As reported in the earlier news-letters, Germany is struggling to power its economy as it had done so many years to become the de-facto “leader” of the European Union. On top of that, with the EU trying to make Europe relevant in the modern techonology led world, Germany seems to be faltering to build a chip factory of Intel.
Intel plans to build a chip factory in Germany with 10 billion euros of federal subsidies, which the government sees as a strategic move to boost the economy and diversify its industry.
The investment is part of a broader EU initiative to increase its share of global chip production and compete with Asian rivals.
However, the project faces challenges such as a lack of skilled workers, a complex bureaucracy, and high energy costs that have hampered Germany’s economic growth and could affect its competitiveness.
The project also raises doubts about Europe’s ability to match the US manufacturing incentives offered through the Inflation Reduction Act and the Chips Act.
UK pivoting from fossil energy while maintaining growth
In UK, there has been a considerable drop in emissions in 2022, which puts UK emissions 49% below 1990 levels, while the economy has grown 75% over the same period.
UK greenhouse gas emissions dropped by 3.4% in 2022, reversing the increase that followed the Covid pandemic.
The main drivers of the emissions decline were the strong growth of clean energy sources, above average conditions and the high prices of fossil fuels that reduced their demand.
Oil emissions rose, as road and air travel recovered from the Covid impact. However, this was more than offset by the lower emissions from coal and gas.
Coal consumption in the UK reached its lowest level since 1757, falling by 15% in 2022.
Wind power achieved a new record high in 2022, increasing by 25% from the previous year.
Emissions had fallen by 9.8% in 2020 due to Covid, but then rose by 5.0% in 2021. Emissions in 2022 were slightly above those in 2020, which was the lowest year on record.
Fundamental design changes in chip making
Due to the increasing demand in computing (specially related to AI), Intel and other companies are looking to fundamentally change the design in chip making.
The chip making industry is undergoing a radical transformation to meet the growing demand for computing, especially in AI applications.
One of the key innovations is the use of optical fiber instead of copper wiring to enable faster and more efficient communication between individual chips.
Ayar Labs is a company specialising in developing optical I/O chiplets, such as the TeraPHY, that can convert electrical signals into optical ones. The company has already delivered thousands of samples to customers like Intel, who are evaluating their performance.
The new chip designs are expected to be deployed in real-world scenarios by 2025 - 2026.