In my last blog, “Bullish Business Expectations,” we talked about our business plans for the beginning of the year. The first quarter of our fiscal year 2023 is three months from March to the end of May. By the time this blog is published, our results are almost final. When we hear about the progress of our business in the four regions of the world so far, we can see that the business in the U.S. is booming. By industry, demand is particularly strong in oil, with sales of edge servers in the upstream of Exploration & Production and midstream of transportation increasing dramatically. Incidentally, transportation requires precise control and monitoring, high safety, and continuous confirmation of the operating status. Until last year, the oil and gas industry was moving toward decarbonization. Under these circumstances, oil companies have set a policy of restraining investment and expanding investment in decarbonization-related businesses. However, the recent Russian invasion of Ukraine has become a disruptor, and in particular, the recent expansion in demand for crude oil and the surge in prices seem to be supporting investment trends.
In Japan, investment in semiconductors and automobiles seems to be firm amid unpredictable economic conditions. In the electronic components and semiconductor markets, demand for consumer IT equipment has been firm. The spread of 5G handsets has increased the amount of equipment installed per smartphone and spread of telecommuting has resulted in a favorable number of PCs shipped. Amid heightened anxiety about the procurement of semiconductors and electronic components against the backdrop of the decline in the operation of semiconductor factories around the world due to the new coronavirus and disasters, the market scale has been higher than before the spread of the new coronavirus infection, partly because final product manufacturers are accumulating inventories. We have also faced an intermittent shortage of semiconductors as components of server products, and there have been cases where we have been forced to purchase some semiconductors at a price that would be unthinkable at the time.
In addition, the heightened geopolitical risks in East Asia, where semiconductor production is concentrated, and the current tightening of the supply and demand for semiconductors, moves to strengthen semiconductor production capacity in the region are intensifying. Enormous financial support is being considered to attract major semiconductor manufacturers in the United States, Europe, and Japan. Taiwan’s TSMC plans to start operations of new plants in Kumamoto Prefecture, Japan, and Arizona, USA, in 2024, which has been widely reported in the news. Intel and Samsung Electronics have also announced vigorous investment plans. Against this backdrop, some semiconductor-related materials and equipment manufacturers are reviewing their base strategies.
The shortage of semiconductors is also having a major impact on automobile production. In addition to the semiconductor shortage, there was also the impact of stagnant procurement of multiple parts due to the re-spread of the new coronavirus infection in ASEAN some time ago. As a result, the recovery in unit sales was limited due to the impact of the shortage of parts supply. Under such circumstances, in addition to continuing cost reductions, we will curb sales incentives in the North American market. Due to the depreciation of the yen, the total profits of the seven major automobile companies have exceeded those before Corona. The other day, Nissan Motor Co. and Mitsubishi Motors announced that they will launch an electric vehicle (EV) mini vehicle this summer. With subsidies from the national and local governments, it seems that the price will be set so that it can be purchased in the low 1 million yen range. It is expected that the spread of electric vehicles will accelerate at once. However, it is difficult to foresee a sudden improvement in the supply of automotive parts, including semiconductors, and there are concerns that production will be constrained. Going back to the automobile industry as a whole, there is a possibility that the scale of production reduction in 2022 will be on par with 2021. With regard to the recovery production that is expected from 2023 to 2024 onwards, it is unclear whether we can expect to recover production to the extent of the scale of production reductions. However, in terms of investments, we expect to be proactive on the back of expectations of increased sales and profits and recovery in production in the most recent financial results, and we expect demand for our edge servers to remain strong.
Lastly, I would like to take a look at the future state of the global economy. In general, it is assumed that the global economy is expected to remain in a situation of high uncertainty for the time being. Personally, however, I assume that the recovery trend will continue. It is said that the economic situation before the corona disaster will return to the October-December quarter of this year, but in some cases we think there is a possibility that it will return to a slightly earlier period. In the U.S. economy, monetary policy has been tightening due to heightened inflationary concerns, but overall the recovery trend has been sustained. In Europe, the surge in crude oil prices, which was impacted by geopolitical risks, has weighed on the recovery, but the recovery trend has continued. The Chinese economy is under severe lockdowns in some regions, and there is downward pressure on private consumption and industrial production for the time being. However, in Asia excluding China, both domestic and external demand have been strong so far. Sales of our hardware and software at AP are also strong.
While this may be wishful thinking, we have a slightly more positive view of the global economic situation after an overview of business developments in the first quarter in each of our regions. Heading into the second quarter from June to August, I expect that there will be more positive signs in each industry, and that the economic recovery will become clear.