Chipmakers Rejoice Over Chip Surplus’s End

Producers, ranging from Samsung in South Korea to Intel in the United States, are jubilant about the beginning of the end of the excess supply of chips. However, demand from consumers outside of the artificial intelligence (AI) sector is still not expected to be strong. This year has seen a decline in all three of the key semiconductor markets: data centers, cellphones, and PCs. In the face of a sluggish global economy, high inflation, and rising interest rates, both individuals and businesses have cut back on their expenditures. There is a significant chip surplus as a result of the decline in demand. The outcome was a record combined first-half operating loss of $12 billion for Samsung and South Korea’s SK Hynix, the two biggest memory chip manufacturers in the world.

But the overabundance period is about to pass. Chip manufacturers have lowered their output. Additionally, according to data from the research firm Canalys, a drop in personal computer shipments dropped to 11% in the June quarter from a 30% reduction in each of the preceding two quarters. According to research firm Counterpoint, the smartphone market is also improving, with handset shipments declining by 8% in the June quarter after rising by 14% in the first. SK Hynix’s chief financial officer, Woohyun Kim, stated on last week’s earnings call that “demand is recovering very gradually.”

According to a recent statement from Intel CEO Pat Gelsinger, there would be a surplus of central processing units (CPUs) for servers into the second half of the year. Additionally, he predicted that third-quarter data center chip sales will drop and then rebound in the fourth quarter. The world’s largest chip customer, China, is seeing a delayed recovery, which is also dampening market expectations. China’s reopening, according to Samsung and SK Hynix, did not live up to predictions that it would revive the smartphone market. The two businesses announced that they were extending their production cuts for NAND memory chips, which are frequently used to store digital data in cellphones.