Shulou(Shulou.com)11/24 Report--

According to Ji Wein.com, since the beginning of the epidemic, the global chip industry has had a strong demand, and even a lack of core, but there are signs that the semiconductor industry may be facing a sudden downturn.

Even for an industry accustomed to frequent cyclical recessions, the problem is difficult to analyze simply, making it difficult for researchers to predict how it will develop in the future, the Financial Times wrote on August 17.

Manufacturers in many automotive and industrial markets still lack a reliable supply of chips, and memory chips, PC processors and other semiconductors are suddenly oversupplied.

It also forced some of the largest US chipmakers to cut billions of dollars in planned capital expenditure at a time when Washington had passed the Chip Act to subsidise a massive increase in domestic chip manufacturing capacity.

Dan Hutcheson, senior chief executive of VLSI Research, who has been analyzing the chip cycle since the 1980s, says the global chip industry is changing at an unprecedented rate.

"I have never seen a time when we have too much inventory and we are short," he said. "

The direct reason is the rapid increase of inventory in the chip supply chain since the beginning of this year. Global inventory levels jumped to 1.4 months in June and then to 1.7 months in July, compared with February, when there were enough chips to support about 1.2 months of production, according to VLSIResearch.

As consumption shrinks, declining PC sales and weak demand for smartphones are the main reasons. But equipment makers have turned things around as fears of an economic slowdown have intensified, and they have been building inventories to increase their resilience to supply pressures. At the same time, it is unclear to what extent weak chip sales reflect supply chain problems rather than falling demand.

The sudden shift has reverberated in the industry since late July, when Intel announced that its revenue fell by $2.6 billion, or 15 per cent, in the most recent quarter. It was lower than expected, which shocked Wall Street. CEO Pat Gelsinger blamed inventory adjustments that took place only once a decade, although Intel admitted its mistakes.

Nvidia announced an even bigger loss of revenue last week as sales of its game chips fell 44% from the previous quarter. Micron, one of the largest memory chip makers, said its free cash flow could turn negative within the next three months after averaging $1 billion in recent quarters.

Intel, which is expected to be the biggest beneficiary of government funding, cut $4 billion from its capital spending plan for the rest of the year on the same day that Congress passed the chip bill, which provided $52 billion in government support.

Meanwhile, Micron last week celebrated the president's signing of the bill, announcing plans to invest $40 billion in the US by the end of the century, but was forced to say it would cut capital spending just a day later.

Gartner, which had expected global chip sales growth this year to halve from 26 per cent in 2021, further lowered its forecast to 7 per cent and now expects it to contract 2.5 per cent to $623 billion in 2023.

The Philadelphia semiconductor index, made up of the 30 largest us companies involved in semiconductor design, manufacturing and sales, has tripled after an early pandemic stock market crash and is down nearly 40 per cent as the stock market recovers this year. But the index has rebounded 24 per cent since early July despite growing signs of a slowdown in chip growth.

Nvidia's share price rebounded on Monday, although its reported revenue fell sharply by 17% compared with previous expectations, but after severe inventory and supply chain pressures over the past two years, few analysts are confident of judging how the economic slowdown will affect the industry as a whole.

While the collapse in demand in the game market was the main reason for Nvidia's disappointing results, Nvidia also said sales of its data center chips were up only 1% from the previous three months. The company explained that there was a shortage of supply rather than a decline in demand, but Intel's financial performance raised doubts that the booming cloud computing market had cooled rapidly.

Mark Murphy, Micron's chief financial officer, said last week that industrial and auto customers had been cutting orders recently. He believes it is too early to tell whether these customers are just adjusting after rapid inventory accumulation, or whether they are responding to falling demand from their customers.

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