Global chipmakers are celebrating the beginning of the end of a semiconductor supply More than Needed, but the outlook for demand from customers outside the artificial intelligence (AI) industry remains gloomy.
All the major markets for chips, smartphones, PCs and data centres have shrunk in 2023, as both corporate customers and consumers scale back spending amid a weak global economy, high inflation and rising interest rates.
This has create an unprecedent oversupply of commodity chips, causing a record combine KRW 15.2 trillion (approx. Rs. 98,650 crore) first-half operating loss for the world’s two largest memory chipmakers, Samsung and SK Hynix.
This glut has said to ease largely due to production cuts and as a decline in PC shipments eased to 11% in the June quarter compared to a 30% slump in each of the previous two quarters, data from tech analysts Canalys show.
The smartphone market is also improving, with cellphone shipments falling 8% in the June quarter, versus 14% in the first quarter, according to research firm Counterpoint.
While demand for chips to support generative AI has rapidly increase since OpenAI’s ChatGPT was launch late 2022, the sector still accounts for a small fraction of overall chip demand and is crimping corporate spending on servers, as some companies prioritize investment in AI.
Intel CEO Pat Gelsinger said an inventory glut in server central processing units (CPUs) will persist until the second half of the year and that data centre chip sales will decline modestly in the third quarter before recovering in the fourth quarter.
Intel shares rose 6.4% Friday after stronger than expect results.
A sluggish recovery in China, the world’s biggest chip buyer, is also dampening the overall outlook.
Both Samsung and SK Hynix said China’s reopening failed to live up to expectations that it would revive the smartphone market, and that they were extending production cuts of NAND memory chips, widely use in smartphones to store digital data.
Analog chipmaker Texas Instruments, which has heavy exposure to China, forecast third-quarter revenue and profit below Wall Street targets, bog down by a sluggish recovery in end-market demand that has force clients to cancel orders.
Manufacturers of the equipment use to make chips such as KLA Corp and Lam Research are early winners of the AI boom.
Both companies forecast quarterly revenue above Wall Street estimates this week.
Chipmakers are also increasing production of the high-end chips use to support AI relate chips.
SK Hynix said demand for AI server memory had more than double in the second quarter compare to the first quarter.
Its DRAM chips, which hold information from applications while the system is in use, sold for a higher price in the second quarter versus the first, on average.
The company leads the market in high bandwidth memory (HBM) DRAM use in generative AI.
It had a 50% market share in HBM as of 2022, follow by Samsung’s 40% and Micron’s 10%, according to TrendForce.
Vedanta Chairman Says Their $5 Billion Made-in-India Chip Will Be Ready in 2.5 Years
Vedanta group chairman Anil Agarwal said that the first phase of its semiconductor project will involve a $5 billion (approx. Rs. 41,300 crore) investment of the overall $20-billion (approx. Rs. 1,64,500 crore) outlay, and the venture will be ready with made-in-India chip in two and a half years.
Vedanta is talking to three companies to rope them in as technology partners for its mega plans entailing foundry, chip manufacturing, and packaging and design.
Anil Agarwal said :
“In 2.5 years, we will give you Vedanta made-in-India chips,”.
The first phase of its semiconductor investment will be to the tune of $5 billion (approx. Rs. 41,300 crore), which is being structure.
Anil Agarwal said :
“Vendata has a good cash flow, we will make a capital allocation in Vedanta and there is a queue of people to give us equity and debt…but we want the tie-ups to be in place first, and have an ecosystem,”.
After parting ways with Foxconn on their semiconductor joint venture, Vedanta group has made it clear that it remains commit to building India’s first semiconductor and display fabs in Dholera Special Investment Region in Gujarat, and substantial progress has happen to tie up with technology and equity partners in semiconductors.
Both Foxconn and Vedanta have now decide to apply for Indian chip-making incentives separately.
Foxconn has said it is working on plans to apply for incentives under the semiconductor and display fab programme, as the contract manufacturer pledge its commitment to India.
The Taiwanese electronics manufacturing giant said it has actively reviewing the landscape for optimal partners.
India is wooing semiconductor and display manufacturers with a $10-billion (approx. Rs. 82,300 crore) incentive scheme, making a determine push to position itself as a global powerhouse for chip making.
Sophisticated chips are part of everyday life, use in mobile phones, refrigerators and cars to high-tech industries, and so fostering local industry with carefully-craft schemes and policy sweeteners will link India to an ever-growing global chip market.
As it is, the global semiconductor shortage has emphasise the importance of this critical component in modern-day electronics.
