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28.07.2023 18:30, Sergey Surabekyants
Global chipmakers such as Intel and Samsung are saying that the semiconductor market is nearing the end of its inventory overstocking problem, although the prospects for demand from customers outside the AI industry remain bleak. Chip glut began to decrease, mainly due to production cuts, and PC shipments in Q2 were down just 11% compared to a 30% decline in each of the previous two quarters.
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Shipments of chips for smartphones, PCs and data centers have declined this year as customers cut costs amid a weak global economy, high inflation and rising interest rates. This led to an unprecedented chip glut and contributed to record combined first-half operating losses of $12 billion for the world’s two largest memory chip makers, Samsung and SK hynix.
A slow recovery in demand from China, the world’s largest buyer of chips, also dampens the overall outlook. Samsung and SK hynix’s expectations of a revival in the Chinese smartphone market did not materialize, leading to a further reduction in the production of NAND memory chips widely used in smartphones. Analog chip maker Texas Instruments, half of whose sales are in China, is forecasting Q3 revenue and earnings below Wall Street targets due to a slow recovery in demand and canceled orders.
And yet, summing up the results of the first half of the year, experts are cautiously optimistic: according to research company Counterpoint, shipments of mobile phones in the 2nd quarter fell by only 8% compared with a 14% drop in the first quarter. There has been an increase in PC shipments, but this is primarily due to promotions, has affected mainly low-cost models and had a limited impact on the recovery in demand for chips.
Demand for chips for generative AI is showing solid growth, but this sector still accounts for a relatively small part of total demand. In addition, by prioritizing investment in AI, many customers are significantly reducing enterprise spending on servers and server processors. According to Intel CEO Patrick Gelsinger, server processor inventory glut will remain until the second half of the year, data center chip sales will decline slightly in Q3, and sales can only be expected to recover in Q4.
Chip-making equipment manufacturers such as KLA Corp and Lam Research have been early beneficiaries of the AI boom. Both companies expect quarterly earnings to top Wall Street estimates, pushing their shares higher. “AI servers have more advanced logic, memory and storage compared to traditional servers, each additional 1% of AI server penetration will attract up to $1.5 billion in additional investment” — confident CEO Lam Tim Archer (Tim Archer).
The demand for AI servers has also affected memory vendors. SK hynix saw a more than doubling in demand for AI server memory in Q2 compared to Q1, driving up the price of DRAM chips as well. The company leads the high-bandwidth DRAM (HBM) memory market with a 50% share of the HBM market as of the end of 2022, with Samsung accounting for 40% and Micron accounting for 10%.
2023-07-28 15:30:00
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