Covid-19 acted as a technology catalyst and trends continue to drive investment in 5G infrastructure, media and chips.
We are living in an increasingly connected world and data has become the world’s fastest growing commodity, with global mobile data and network traffic growing at +28% CAGR for the period 2021-2027 according to BNP Paribas Exane’s recent report*. Yet it does not exist in a vacuum. Data is processed using chips, stored on servers and in data centres. It is sent at lightning speed down information highways to reach more devices, all powered by semiconductors and connected by high-speed broadband. This interplay makes up great swathes of a country’s critical infrastructure.
In the wake of Covid, the tide of globalisation is ebbing and global supply chains are changing. Onshoring is on the rise, and countries the world over are realising the strategic importance of infrastructure.
Europe and America are bringing chips on shore
As global tensions rise, a new world order is beginning to emerge alongside an unfamiliar, less certain geopolitical environment. This era of uncertainty and conflict is changing the playing field for technology infrastructure. This is particularly true for Taiwan, which has long dominated the world’s semiconductor industry, producing more than 60% of all chips worldwide and over 90% of the most advanced ones.
In today’s evolving geopolitical environment, new alliances are emerging. Both the US and the EU have acknowledged the need to rapidly ramp up domestic investment in critical infrastructure, particularly, but not exclusively, the production of chips. Last August, President Biden signed the CHIPS and Science Act into law, providing a US$52-billion incentive package to support the US semiconductor industry. In April, the US$47-billion (€43-billion) European Chips Act, which aims to double the European Union’s share of the global chip market to 20% within the decade, received the green light.
Over US$180 billion has already been invested in new US chips factories and many more are under consideration. But skills gaps at all levels from construction through to manufacturing, as well as supply chain disruption, inflation, and price volatility, mean that the new chip-making journey is unlikely to be straightforward, in either the United States or within the European Union.
A new wave of joint ventures
While vital for national security, reshoring of critical manufacturing, such as chips, requires large-scale capital. Although both the US and EU are funding semiconductor technologies, vast investments are still needed to support infrastructure developments. A growing number of both public and private sector joint ventures are emerging to fill the gap.
“There’s a real momentum in this area,” said Barbara Nash, Managing Director and Head of Technology Media Telecom (TMT) Coverage at BNP Paribas. “We’ll see many similar and parallel opportunities where private equity and industry get together to deliver these massive projects.” Indeed, with similar structures previously seen in Europe to fund the roll-out of fibre, telecom company AT&T and investment manager BlackRock recently formed Gigapower, the first joint venture for fibre investment in the US. BNP Paribas was Coordinating Lead Arranger and lender on the initial US$1.7-billion financing.
❝ There’s a real momentum in this area. We’ll see many similar and parallel opportunities where private equity and industry get together to deliver these massive projects. ❞
Fuelling the future
As the climate of global competition heats up, technological advances are becoming increasingly visible. “It’s not only 5G but other investments that allow for more robotics and more AI,” Nash says. ”It’s all that deep-rooted infrastructure that things then get layered on top of. All these require enhanced storage, connectivity and processing power, driving demand for both infrastructure and chips.”
❝ It’s not only 5G but other investments that allow for more robotics and more AI. It’s all that deep-rooted infrastructure that things then get layered on top of. All these require enhanced storage, connectivity and processing power, driving demand for both infrastructure and chips. ❞
While artificial intelligence (AI) is increasingly capturing the consumer’s imagination, public and private investment in digital infrastructure will power further innovation across industries. B2B and B2C applications including the Internet of Things will enhance developments in autonomous driving, industrial automation, and more. As the climate of global competition heats up through ongoing investments, the impacts of a transformed infrastructure landscape are likely to be felt by enterprises and consumers alike.
“From OpenAI’s leadership in the AI renaissance to growing investments in climate tech, we can see how technology and infrastructure developments are mutually reinforcing,” said Matthieu Soulé, Head of BNP Paribas’ innovation lab, C.Lab Americas. “Technology advances fuel infrastructure development, which in turn make new technologies possible.”
❝ From OpenAI’s leadership in the AI renaissance to growing investments in climate tech, we can see how technology and infrastructure developments are mutually reinforcing. Technology advances fuel infrastructure development, which in turn make new technologies possible. ❞
BNP Paribas: Global Technology, Media and Telecommunications Expertise
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“GenAI: How to Use It”, published by BNP Paribas Exane on 31 May 2023, figure 125, page 176, Stuart Pearson and Stefan Slowinski
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