According to a survey published by the Nikkei, Japanese companies plan to raise investment by 25% more this fiscal year. This is the sharpest jump since 1973. It is driven by rising demand for electric vehicles and a global shortage in semiconductors. Along the same line, India will spend $30 billion to overhaul its tech industry and build up a chip supply chain to ensure it is not "held hostage" to foreign providers, the country's top diplomat to Taiwan told Nikkei Asia in an interview last week. The US, Taiwan and South Korea are on the same page.

Panasonic Holdings has announced a 45.5% capex boost to 345 billion yen as it prepares to mass-produce new batteries for Tesla. Sony Group will invest more into image sensors, which are used in smartphone cameras. Suzuki Motor is looking at a 53.1% jump to 290 billion yen, as it plans a new EV and battery plant in India. 

Ajit Mocha, CEO of SEMI, a global association of companies and professionals in electronics design and manufacturing, said chipmakers, the worldwide supply chain crunch is not expected to recover before 2024. He indicated there are 92 new fabrication plants coming online worldwide in the next few years to cater to surging demand for semiconductors, however the situation is not expected to improve until all the plants are up and running. "We have seen an average lead time for equipment manufacturers increasing from three to four months to 10-12 months," he added. This is a catch-22 situation, short supply of semiconductors is hurting semiconductor equipment manufacturers and exacerbating the shortage.  The war in Ukraine is adding insult to injury creating disruption for key raw materials for semiconductors such as neon.

Manufacturing is being hit by multiple supply shocks including skilled labor shortages. For example, TSMC is having a difficult time to hire staff for its new factory in Arizona: construction workers for the building site but also engineers and technicians. Arizona hosts the largest engineering school in the US. However, to poach talents, is having a hard time vying with Intel, Microsoft. Costs are running above budget and the opening date of the mega plant has been postponed.

At the end of the day, in advanced manufacturing this is a TINA situation: there is no alternative. Global warming is happening now. We need more semiconductors, cleaner energy and importantly more robots. Whatever happens at the macro level, industrial companies involved in these fields are bound to thrive in a secular capex boom. Their share price has been hammered in the last six months and they trade on historically very low valuations.



Investors have spent a lot of time in the past decade talking about financial engineering. It is time to get back in the real world and to look at industrial engineering.