AI boom joins Asia’s EV, chips mineral race

Asia has overtaken Europe in the race to adopt Artificial Intelligence. The expected buildout of digital infrastructure will add to the region’s already strong demand for processed critical minerals for electric vehicle and semiconductor manufacturing.

That processing, currently dominated by China, is the subject of intense policy debate across the region. Australia stands to increase its influence throughout Asia, particularly with countries like Japan and Korea, if it can secure a greater part of this supply chain.

AI swells in Asia

Asia is asserting itself in the race for AI supremacy. Estimates of regional demand for the technology paint a consistent picture.

According to Deloitte, AI investment in Asia Pacific is expected to surge five-fold to US$117 billion (AUD$179.2 billion) by 2030. New research published by PwC reveals that trusted AI could boost economic output in the Asia Pacific region by almost 15 per cent over the next decade – that’s comparable to the industrial revolution.

Meanwhile, Boston Consulting Group says more executives in APAC are convinced of AI’s ability to generate value than their peers in Europe. It was also recently noted in Australia that there are more Chat GPT users in Indonesia and Vietnam combined than there are in the United States.

ANZ Head of International Tech & Auto Alfred Bae told ANZ Insights that Asia plays a pivotal role in driving and supporting global AI demand.

“We’re seeing deals in the billions of dollars for digital infrastructure and manufacturing capacity expansion proposed across Asia,” says Bae. “This aligns with other leading indicators such as usage and return-on-investment expectations.”

Data centres require silicon for foundational chips, and nickel for thermal stability and electromagnetic shielding, while copper is used for electrical conductivity and aluminium for heat sinks and server chassis. A large portion of these goods are processed, manufactured, and assembled in Asia, which stands to benefit significantly from global AI growth.

AI meets Australia’s energy transition prep

Asia’s AI demand comes at a time when regional demand for processed critical minerals is already rising thanks to EVs and semiconductors.

“China is the most developed market when it comes to EVs manufacturing, supply chains and usage,” says Bae. “Fifty per cent of new cars sold in China are EVs. The country is home to the largest battery manufacturer in the world, CATL, and the largest vertical integrated EV manufacturer BYD.

“Excluding China, Korea is the largest battery manufacturer with Samsung, and SK. While Japan is a little behind Korea, the country still produces a large number of batteries through Panasonic and is strengthening its semiconductor value chain domestically.

“Taiwan, home to the world’s most advanced semiconductor foundry, TSMC, is highly reliant on secure and diversified access to materials like  gallium, germanium, tungsten and tantalum."

Meanwhile, India is a leading case study for how much demand these supply chains are expected to receive. ANZ Senior Commodity Strategist Daniel Hynes says India’s clean energy ambitions will drive strong demand for copper, aluminium, nickel, lithium and cobalt.

“Renewable energy, battery storage and EVs will drive a materials revolution,” says Hynes. “We anticipate India’s need for critical minerals and metals will rise by nine times to 6.2mt by 2040, with their share demand rising from 12 per cent to 40 per cent.”

Policy for critical minerals well developed

Australia has been positioning itself to meet that demand with the Critical Mineral Strategy, Critical Materials List, and Future Made in Australia Act, with a particular focus on the renewable energy transition.

Paul Richards, ANZ Global Head of Resources, Energy & Infrastructure tells ANZ Insights Australia is likely to play an important role in the critical minerals supply chain regardless of what happens.

“Lithium is the story everyone is familiar with. It’s a core component of battery cells, enabling energy storage and release,” says Richards.

“We’ve seen large swings in demand and supply, and a lot of price volatility, which makes it difficult to invest. You want to know there’s deep markets for what’s produced, and all the signals are over the long term that’s going to be the case.

“Australia is the largest producer of bauxite, the primary ore for aluminium, which is used in EV vehicle frames, battery casings and wiring,” says Richards.

“Australia possesses a broad range of critical minerals, though in varying quantities. A key consideration is whether the country can capitalise on this opportunity to process these resources onshore and, at the same time, capture greater economic value.”

Still processing

China famously controls 80-90 per cent of critical minerals processing, which is a challenge and an opportunity for Australia in the region, says Bae.

“It’s in the interest of Australia’s trading partners, such as Korea, Taiwan and Japan, who want to continue developing their high-tech industries, to diversify their supply chains.

“If Australia wants to build deeper ties with these nations, it needs to offer them what they want, which is stable supply of processed critical minerals.”

“The Government has seen this coming through the prism of the renewables transition. EVs and Artificial Intelligence just strengthens the case.”

Alexander Liddington-Cox is a contributor with ANZ Insights.