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CONTRIBUTORS

Marcus Weyerer, CFA

Director of ETF Investment Strategy EMEA
Franklin Templeton ETFs

Preview

Technology is the only unlimited source of growth

According to the neoclassical Solow Growth Model, long-run economic growth in a country only ever hinges on three factors: a growing population, capital deepening (i.e., expanding the capital base per worker) and increasing productivity, usually driven by technological progress and innovation. However, the first two factors are subject to diminishing marginal returns and have frequently become growth detractors in developed markets. For instance, the population of the European Union is expected to peak within two years (in 2026) and then decline by a total of 34 million by 2100.1 The US population is still expected to grow until 2070, but from 2040 net immigration—most likely from emerging economies—is forecast to account for 100% of all growth.2 Fortunately for developed countries, the third factor, technological advancement, remains a theoretically unlimited source of growth.

In this paper, we explore the integral role of the semiconductor industry in driving technological innovation and economic growth, with a particular focus on Asia’s central position within this ecosystem. It delves into the complexities of the semiconductor supply chain, discussing key players such as Taiwan, South Korea, Japan, and emerging contributors like India and Southeast Asia.

Past, Present, Future: Population Trends across key regions (2024 = 100)

In millions

Source: World Bank. 2024. Analysis by Franklin Templeton. Data after 2024 are projections. There is no assurance that any estimate, forecast or projection will be realized. 

We believe a regional and ecosystem-based investment approach can provide a comprehensive exposure. Understanding these regional dynamics is crucial for investors seeking to capitalize on the future of technology.

Endnotes

  1. Source: “Population projections in the EU.” Eurostat, October 2023.
  2. Sources: “U.S. Population Projected to Begin Declining in Second Half of Century.” US Census Bureau, November 9, 2023.. “The Demographic Outlook: 2024 to 2054.” Congressional Budget Office, January 2024.

 

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