Asian Air Cargo Is Redrawn by The AI Race, Displacing E-Commerce as The Growth Engine

As cross-border e-commerce slows down, airlines are redesigning networks around expanding semiconductor manufacturing hubs as a result of the global race to develop artificial intelligence.

The need for AI infrastructure, in contrast to the post-pandemic parcel boom, is supported by multi-year contracts for advanced memory chips and processors, as well as hundreds of billions of dollars in anticipated investments in data centers, according to airlines and logistics firms.

Concurrently, the cross-border e-commerce trade that has fueled a large portion of the industry’s recent expansion is being curbed by stricter low-value import regulations in the United States and Europe.

“E-commerce was air freight’s single biggest growth pillar, but that is no longer the case,” stated Niall van de Wouw, Xeneta’s chief airfreight officer, during the company’s mid-year forecast release this month.

One of the best illustrations of the shift is provided by Korean Air Lines (003490.KS), which opens a new tab.

AI chips, server racks, and data center infrastructure, which the airline claimed had supplanted e-commerce exports from China as its main growth engine, drove a 46% increase in cargo revenue to 1.54 trillion won ($1.07 billion) in the second quarter.

According to Jaedong Eum, executive vice president and head of Korean Air’s cargo division, advanced high-tech cargo “has rapidly expanded ⁠as a core growth driver.”

Orders for sophisticated high-bandwidth memory chips and processors already extend two to three years into the future, despite the fact that supply is still falling short of demand, he said.

According to Xeneta, global semiconductor sales more than doubled year over year in April, the biggest increase since records started in 1986. In contrast, China’s e-commerce and low-value exports decreased by 7% in May, the sixth consecutive month that this has happened.

The European Union eliminated its own duty-free threshold this month, while the United States terminated duty-free de minimis status for low-value imports from China last year.

Shein, a fast-fashion retailer, stated on Sunday that these changes have negatively impacted its company in the United States and were anticipated to cause more difficulties in Europe. Even though exports tied to semiconductors continued to be robust, Japan’s ANA Holdings (9202.T), opens new tab, warned in a statement that the EU decision posed a risk to the overall cargo market.