Chipmakers signal supply glut easing but demand recovery still slow

economictimes.indiatimes.com:

chipmakers are celebrating the beginning of the end of a semiconductor supply glut, 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 this year, as both corporate customers and consumers scale back spending amid a weak global economy, high inflation and rising interest rates.

This has created an unprecedented oversupply of commodity chips, causing a record combined 15.2 trillion won ($12 billion) first-half operating loss for the world's two largest memory chipmakers, Samsung and SK Hynix. This glut, however, has started 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 showed.

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. «Demand is recovering very gradually,» Woohyun Kim, chief financial officer at SK Hynix, said on an earnings call this week.

«The recent improvement in PC shipments has been mainly led by promotions and low-end models, meaning it provided limited impact on chip demand recovery,» he said, adding that shipment forecasts for PCs and smartphones this year have been downgraded from earlier predictions. While demand for chips to support generative AI has rapidly increased since OpenAI's ChatGPT was launched late last year, 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.