Our recent research trip across South Korea, Japan, and Taiwan highlighted a common theme – the global build-out of AI and the green energy transition are completely reliant on highly dense, localised industrial clusters.
By conducting on-site smart factory tours and management meetings, we identified extraordinary quality-growth opportunities. These companies possess deep structural moats, high pricing power and visibility stretching out to 2030 and beyond.
South Korea: Power grid electrification and shipping decarbonisation
Our time in South Korea focused on the southeastern maritime industrial region, clustered around Ulsan, Changwon, Geoje, and Busan. This region forms an interconnected industrial ecosystem where components move across town in hours rather than weeks, reducing supply-chain friction.
The structural tailwinds here are two-fold – a multi-year global shortage of ultra-high-voltage (UHV) transformers driven by AI data centres and utility electrification, and the International Maritime Organization (IMO) mandate for net-zero emissions by or around 2050. This is forcing global shipping fleets into a multi-decade replacement cycle toward eco-friendly dual-fuel engine.
Japan: High precision 'monozukuri' and infrastructure modernisation
In Japan, we focused on the Kansai region (Osaka, Kyoto, and Kobe), which hosts a dense concentration of factories and small-to-medium enterprises deeply rooted in monozukuri – the art of making things with extreme precision. This has supported world-leading precision machinery, automatio and infrastructure franchises.
Japan’s industrial distribution sector illustrates how digital procurement platforms can build durable advantages through logistics sale and data-driven efficiency. One example is MonotaRO, which uses a sophisticated synonym database that maps informal field slang (‘genba no kotoba’) to formal industrial product codes, reducing search friction for tradesmen and securing sales over traditional wholesalers.
The business demonstrates remarkable margin stability; its policy of passing increased procurement costs and foreign exchange pressures directly onto selling prices has resulted in minimal customer churn, supported by a highly loyal customer base where existing clients generate nearly 90% of total sales.
Growth is driven by enterprise expansion and logistics optimisation. A growing specialist sales team has deepened penetration within high-value enterprise locations – achieving an outstanding 80% positive response rate in recent site visits.
Efficiency and operating margins are poised for a significant structural step-up with the opening of the new, highly automated Mito Distribution Centre in 2028, which is projected to be three times more efficient than the facility it replaces.
Furthermore, MonotaRO is successfully scaling its international blueprint; its South Korean operations achieved profitability in 2025 and India represents a massive long-term runway as Japanese enterprises rapidly establish manufacturing footprints there.
Taiwan: The concentrated epicentre of the global semiconductor ecosystem
The Taiwanese leg of our trip underscored why the global AI hardware boom depends on a highly co-dependent, physically concentrated ecosystem. Within the Hsinchu Science Park, fabless design houses, intellectual property providers and software-heavy franchises operate in close proximity to TSMC’s core engineering teams – allowing for rapid, iterative co-development that creates a competitive moat against global rivals.
TSMC acts as the foundational bottleneck and sole manufacturer for the world's most advanced AI chips. However, there is a shift away from ‘one-size-fits-all’ general processors toward customised, modular architectures like Application-Specific Integrated Circuits (ASICs) and chiplets.
Hyperscalers (such as AWS, Microsoft, and Google) are aggressively designing custom AI accelerators to optimise workloads and avoid absolute reliance on single-vendor merchant silicon.
Semiconductors are becoming physically too large to manufacture on a single piece of silicon, these design houses are heavily reliant on driving demand for TSMC’s advanced packaging technologies, such as Chip-on-Wafer-on-Substrate (CoWoS) and chiplet designs.
Furthermore, pure IP design and architecture firms enjoy a lucrative business model. Once upfront R&D is completed, licensing that technology to a new customer costs virtually nothing, allowing top-line growth to convert cleanly into near-100% gross margin profit.
Portfolio strategy and outlook
Our trip confirmed that the best way to invest behind the secular AI and electrification themes is through small-to-mid cap mission-critical suppliers.
Whether it is an elevator service provider in Tokyo capitalising on defensive recurring contracts, or a silicon IP designer in Hsinchu collecting high-margin royalties, we are focused on businesses with high barriers to entry, pricing power, and structural tailwinds that insulate them from broader macroeconomic volatility.
Annabelle Miller is a portfolio manager at ECP Asset Management. The views expressed above should not be taken as investment advice.