From Intel to Samsung, global chipmakers are celebrating the beginning of the end of the semiconductor supply glut, but the demand outlook from customers outside the artificial intelligence (AI) industry remains disappointing.
All major markets for chips – smartphones, PCs and data centers – have shrunk this year, as both corporate clients and consumers have reduced spending amid a weak global economy, high inflation and rising interest rates.
This has created an unprecedented oversupply of commodity chips, leading to a record combined first-half operating loss of KRW 15.2 trillion (roughly Rs. 98,650 crore) for the world’s two largest memory chip makers, Samsung and SK Hynix.
However, that glut is beginning to ease largely due to production cuts and the decline in PC shipments slowed to 11 percent in the June quarter, compared with a 30 percent decline in each of the previous two quarters, tech analysts at Canalys said. The data showed.
The smartphone market is also recovering, with cellphone shipments falling 8 percent in the June quarter, compared with a 14 percent decline in the first quarter, according to research firm Counterpoint.
“Demand is recovering very slowly,” SK Hynix Chief Financial Officer Woohyun Kim said on an earnings call this week.
“The recent recovery in PC shipments has been mainly driven by promotions and low-end models, meaning it has had a limited impact on the recovery in chip demand,” he said.
While demand for chips supporting generic AI has grown rapidly since OpenAI launched ChatGPT late last year, the sector is still a small portion of overall chip demand and is driving down corporate spending on servers. This is because some companies prioritize investing in AI.
Intel CEO Pat Gelsinger said Thursday that the inventory glut in server central processing units (CPUs) will persist into the second half of the year and that data center chip sales will decline slightly in the third quarter before recovering in the fourth quarter. Intel shares rose 6.4 percent on Friday after better-than-expected results.
The sluggish recovery in China, the world’s biggest chip buyer, is also weighing on the overall outlook.
Both Samsung and SK Hynix said China’s reopening has failed to live up to expectations that it would revive the smartphone market, and they are cutting production of NAND memory chips, which are widely used to store digital data in smartphones. Used to do.
Analog chip maker Texas Instruments, which has heavy investments in China, on Tuesday forecast third-quarter revenue and profit below Wall Street targets, hit by a sluggish recovery in end-market demand that has prompted customers to cancel orders. Forced to do. Shares were up 1.5 percent on Friday.
“China accounts for nearly half of TI’s sales at the end of fiscal 2022, so China has the biggest impact on TI’s business,” said Logan Perk, an analyst at investment firm Edward Jones.
AI Winner
Makers of equipment used to make chips like KLA Corp and Lam Research are early winners of the AI boom. Both companies this week reported quarterly revenue that exceeded Wall Street estimates. The shares were up 4.9 percent and 2.2 percent, respectively, on Friday.
“Advanced AI servers have significantly more edge logic, memory, and storage content than traditional servers, and each 1 percent increase in AI servers and data centers can lead to $1 billion (approximately Rs 8,200 crore) to $1.5 billion (approximately) There is expected to be an additional (chip equipment) investment of Rs 12,330 crore, Lam CEO Tim Archer said on a conference call with analysts.
Chip makers are also increasing production of high-end chips used to support AI-related chips.
SK Hynix said demand for AI server memory more than doubled in the second quarter compared to the first quarter. Its DRAM chips, which hold information from applications while the system is in use, were sold on average at a higher price in the second quarter than in the first quarter.
The company is the market leader in high bandwidth memory (HBM) DRAM used in generative AI. According to TrendForce, it had 50 percent market share in HBM by 2022, followed by Samsung at 40 percent and Micron at 10 percent.
© Thomson Reuters 2023
