How the Global Semiconductor Shift Could Reshape Industrial Development in the Global South

Executive Summary

The global semiconductor industry is entering a new phase of structural transformation, driven by geopolitical realignments, surging demand for artificial intelligence (AI) chips, and the push for supply chain resilience. According to Deloitte's 2026 Global Semiconductor Industry Outlook, the sector is expected to reach $1 trillion in revenue by 2030, with AI-centric chips accounting for a growing share. For the Global South, this presents a strategic inflection point: while most emerging economies remain net importers of semiconductors, the industry's geographic dispersion and talent needs create openings for industrial policy, regional cooperation, and technology adoption. This article examines the development implications, economic significance, and policy priorities for countries in Africa, Latin America, South Asia, and Southeast Asia as they navigate the semiconductor revolution.

Introduction

Semiconductors are the bedrock of modern electronics, powering everything from smartphones and electric vehicles to data centers and defense systems. For decades, the industry's value chain has been concentrated in a handful of economies—Taiwan, South Korea, Japan, the United States, and parts of Europe. However, the 2026 outlook highlights a decisive shift: governments worldwide are investing heavily in domestic chip production through initiatives like the US CHIPS Act, the European Chips Act, and similar programs in India, Vietnam, and Morocco. The Global South, long relegated to low-value assembly and packaging, is beginning to attract higher-value fabrication and design activities.

Background & Context

Deloitte's report underscores several macro trends: first, the exponential growth of AI workloads is driving demand for advanced logic and memory chips, with AI-related semiconductor revenue projected to grow at a compound annual rate of over 20% through 2026. Second, geopolitical tensions—particularly US-China technology competition—are fragmenting supply chains and prompting a "friend-shoring" strategy. Third, automotive and industrial applications are requiring more chips as electrification and automation spread. For the Global South, these trends create a dual scenario: on one hand, the cost of entry for advanced manufacturing remains high; on the other, the industry's labor intensity and need for proximity to end markets favor regions with young populations and growing electronics sectors.

Main Analysis

Industrial Policy and Investment Climate

Countries like India, Malaysia, Vietnam, and Kenya are actively courting semiconductor investments. India's $10 billion production-linked incentive scheme for semiconductors and its partnership with the US on a semiconductor supply chain are notable examples. Deloitte's outlook suggests that emerging economies can capture a larger share of the $500 billion global semiconductor market by focusing on assembly, testing, and packaging (ATP) before moving to fabrication. However, success requires stable policies, infrastructure reliability, and skilled engineering talent.

Technology Adoption and Innovation Ecosystems

The rise of open-source chip architectures, such as RISC-V, lowers barriers for smaller players. Universities and startups in the Global South can participate in chip design without massive capital outlays. Brazil's CEITEC and South Africa's Council for Scientific and Industrial Research exemplify early-stage efforts. The challenge lies in scaling from research to commercial production—a gap that public-private partnerships and South-South cooperation can help bridge.

Geopolitical Dynamics and Supply Chain Diversification

As multinational corporations seek to reduce concentration risk, emerging markets are increasingly seen as alternative manufacturing bases. Deloitte notes that Southeast Asia already hosts significant backend operations, while Mexico benefits from near-shoring trends for North America. For sub-Saharan Africa, the opportunity is nascent but growing: the African Continental Free Trade Area could create a larger market for electronics, attracting investments in basic chip assembly.

Development Impact

Economic Development and Industrialization

A domestic semiconductor ecosystem can catalyze broader industrialization by creating demand for specialized chemicals, gases, precision machinery, and clean energy. For example, Malaysia's electronics cluster has spurred growth in related industries and services. Employment generation in chip fabrication and testing is moderate but high-value, with ripple effects on local supply chains.

Technology Adoption and Digital Economy

Access to locally produced chips can reduce import dependence and lower costs for digital infrastructure, benefiting sectors like fintech, e-government, and smart agriculture. Countries that develop semiconductor capabilities are better positioned to customize chips for local needs—such as low-power IoT sensors for climate monitoring or affordable medical devices.

Energy Transition and Climate Resilience

Semiconductors are critical for renewable energy systems, smart grids, and electric vehicles. By building chip capacity, the Global South can accelerate its own energy transition and reduce carbon emissions. However, chip fabrication is water- and energy-intensive; sustainable practices must be integrated from the outset.

Global South Perspective

Africa: The continent remains the least integrated into global semiconductor supply chains, but pockets of innovation exist—Morocco has attracted investments from STMicroelectronics, and Kenya's tech ecosystem supports chip design startups. Regional bodies like the African Development Bank could fund shared fabrication facilities (fab-lite models).

Latin America: Countries like Mexico, Costa Rica, and Brazil have strong electronics manufacturing bases. Mexico's proximity to the US market positions it well for assembly and testing. However, limited R&D spending and weak intellectual property regimes hinder higher-value activity.

South Asia: India is the most advanced in the region, with a massive engineering talent pool and policy push. Pakistan and Bangladesh have nascent electronics sectors but could move into design and testing via offshore design centers.

Southeast Asia: Already a hub for backend manufacturing, countries like Vietnam, Thailand, and the Philippines are upgrading to wafer fabrication. The ASEAN bloc could coordinate on a regional semiconductor strategy to attract large-scale investment.

South-South Cooperation: Platforms like the BRICS New Development Bank and the Asian Infrastructure Investment Bank can finance semiconductor projects. Technology transfer agreements between India and Africa, or between China and Latin America, offer pathways for capacity building.

Future Outlook (2026–2035)

Over the next decade, the semiconductor industry will likely see a multi-polar geography emerge. The Global South's share of chip production—currently below 5% excluding China—could double or triple if current policy efforts succeed. Key enablers include:

• Investment in STEM education and specialized training programs.
• Creation of regional chip design hubs leveraging open-source architectures.
• Development of specialized industrial zones with reliable power and water.
• International partnerships for technology licensing and equipment access.
• Adoption of advanced packaging and heterogeneous integration techniques that require less capital-intensive tools.

Challenges remain: high capital costs, intellectual property concerns, and the risk of subsidy races among developing countries. A coordinated approach—both within regions and through South-South alliances—will be critical.

Conclusion

The global semiconductor shift is not just a technology story; it is a development opportunity for the Global South. While the barriers to entry are steep, the ongoing industry restructuring offers a window for strategic industrial policy, regional integration, and human capital development. Countries that act decisively now—building skills, infrastructure, and partnerships—can position themselves as essential nodes in tomorrow's semiconductor landscape. Deloitte's 2026 outlook reminds us that the future of chips is not predetermined; it will be shaped by policy choices today. For the Global South, the choice is clear: invest in semiconductor capabilities or risk being left further behind in the digital economy.