Speaking to Investment Week, Boon explained that demand has rapidly outstripped supply, largely as a result of the acceleration of a “digital lifestyle” caused by global lockdowns.
“If you think about how we are now conducting all our meetings digitally, working from home and studying from home, this has supercharged the demand for new devices,” he said.
“But not just mobile devices – new wi-fi, new laptops, new data centres are required to power all these new online experiences.
“At the end of all these are semiconductors. They are the foundation of the digital economy, but with demand elevated, supply has not been able to catch up.”
While Covid has benefitted the demand side of the equation, it has detracted from the supply side, with the same restrictions that increased digital usage disrupting the ability to increase production of semiconductors.
A result of this is a changing footprint in the manufacturing of semiconductors, traditionally in Taiwan and South Korea.
“Europeans and Americans are now asking Taiwan and South Korea to build new semiconductor capacities in the US and Europe locally,” Boon said.
“It will take time to fix the shortage we are seeing because research and development and building new manufacturing facilities all take time. Taiwan Semiconductor Manufacturing Company (TSMC) is building in Arizona, but the earliest these facilities can start operating is 2023 and beyond.”
InnovAsia is the second 5G fund launched by Neuberger Berman in just over a year and Boon explained it will focus on the smaller Asian companies that enable the continued growth of household names such as Samsung and Sony, rather than the big firms themselves.
“We are focusing on the Asian small giants with technology or innovations in the early stages of commercialisation,” he explained.
These are companies that provide a rapid growth rate of 40%-70% but were “too small to move the needle” on the larger 5G Connectivity fund.
Despite the small size of the stocks, the investable universe is very large, according to Boon.
“We are referring to about $5trn combined market cap and these are companies that are already listed. If we look at the pipeline of new IPOs to come in Asia over the next two years, we are looking at an extra trillion dollars.”
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