Global chipmakers like Intel and Samsung are optimistic about the semiconductor supply glut coming to an end, but the demand outlook from non-AI industries remains bleak. Major chip markets, such as smartphones, PCs, and data centers, have experienced a decline in demand due to reduced spending from both corporate customers and consumers. This oversupply of commodity chips has resulted in significant losses for Samsung and SK Hynix, with a combined operating loss of KRW 15.2 trillion (approximately Rs. 98,650 crore) in the first half of the year.
Fortunately, the glut is starting to ease thanks to production cuts and a slowdown in the decline of PC and smartphone shipments. Tech analysts Canalys reported that PC shipments in the June quarter only saw an 11 percent decline compared to the previous two quarters’ 30 percent slumps. Similarly, research firm Counterpoint revealed that cellphone shipments fell by only 8 percent in the June quarter, an improvement from the 14 percent decline in the first quarter.
Woohyun Kim, the CFO of SK Hynix, noted that demand is gradually recovering. However, he mentioned that the recent improvement in PC shipments was driven by promotions and low-end models, which had limited impact on chip demand recovery. As a result, shipment forecasts for PCs and smartphones this year have been downgraded.
Despite the increase in demand for chips to support generative AI, this sector still accounts for a small fraction of overall chip demand. This is affecting corporate spending on servers as companies prioritize investment in AI. Intel CEO Pat Gelsinger predicts that the inventory glut in server CPUs will persist until the second half of the year, with data center chip sales declining in the third quarter before recovering in the fourth quarter.
The overall outlook is also dampened by a sluggish recovery in China, the world’s largest chip buyer. Samsung and SK Hynix reported that China’s reopening did not meet expectations of reviving the smartphone market, leading them to extend production cuts of NAND memory chips used in smartphones.
Advanced AI servers are experiencing growth, benefiting chip manufacturing equipment companies like KLA Corp and Lam Research. Both companies have forecasted quarterly revenue above market estimates. Lam CEO Tim Archer stated that AI servers and data centers, with their higher leading-edge logic, memory, and storage content, have the potential to drive billions of dollars in additional chip equipment investment for every percent increase in their penetration rate.
Moreover, chipmakers are increasing the production of high-end chips used to support AI-related chips. SK Hynix witnessed demand for AI server memory more than double in the second quarter compared to the first quarter. Additionally, their DRAM chips, which store information from applications while the system is in use, sold at higher prices in the second quarter.
In terms of market share in high bandwidth memory (HBM) DRAM used in generative AI, TrendForce reported that SK Hynix leads with a 50 percent share, followed by Samsung at 40 percent and Micron at 10 percent.
© Thomson Reuters 2023
Denial of responsibility! TechCodex is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
Alex Smith is a writer and editor with over 10 years of experience. He has written extensively on a variety of topics, including technology, business, and personal finance. His work has been published in a number of magazines and newspapers, and he is also the author of two books. Alex is passionate about helping people learn and grow, and he believes that writing is a powerful tool for communication and understanding.
