The top 10 chipmakers will cut their capital expenditures by

The top 10 chipmakers will cut their capital expenditures by 16% for the year

At the end of last year, the top 10 chipmakers invested a record $146.1 billion to expand and modernize their businesses. This year, the amount is set to be reduced by 16% to $122 billion, for the first time since 2019 and the sharpest in the previous decade. Six out of ten companies are willing to reduce the cost of capital.

    Image source: NVIDIA

Image source: NVIDIA

As mentioned Nikkei Asian Review, Processor manufacturers will see a 14% decline in capital expenditures this year, while memory manufacturers will see a 44% decline in capital expenditures this year. Those willing to reduce capital spending include Intel, GlobalFoundries, Micron Technology, TSMC, SK Hynix, and a joint venture between Western Digital and Kioxia Holdings. On the one hand, the downsizing of capital spending programs has been facilitated by active investments in expanding production lines during the pandemic years, so the resulting high base effect now puts the dynamics of capital spending in a not very favorable light.

On the other hand, demand in the Chinese market, which is the largest for many chipmakers, is recovering too slowly to keep capital spending at last year’s levels. According to Omdia representatives, there is a surplus of semiconductor components in some market segments, particularly those manufactured in 10-14nm lithographic standards. Samsung Electronics, UMC, Infineon Technologies and STMicroelectronics are among those unwilling to cut capital spending from the top 10 chipmakers. European manufacturers, including the last two companies, are keen to increase the region’s “technology sovereignty” and this may explain their desire to maintain or even increase capital spending at current levels.

According to Omdia, nine companies on the list saw inventory value increase 10% year over year to $88.9 billion through the end of June, and it’s up 70% overall compared to the first half of 2020. Memory makers will be the hardest to cut their capital spending programs, although Samsung isn’t ready to take such steps just yet. Micron will reduce memory production by 30% and reduce capital expenditures by 40% by August 2024. SK hynix will more than halve capital expenditures this year and reduce production by at least 10%. DRAM and NAND memory prices fell more than 40% in August, largely due to overproduction. According to Japanese analysts, demand and prices for memory chips will not grow again until next year.

In addition to artificial intelligence systems, the growth of the semiconductor components market will also be supported in the long term by the demand for chips for electric vehicles and active driver assistance systems on board. Currently, automotive components account for only 10% of demand in the global chip market. By 2025, the core market’s capacity will increase by 50% to $83 billion, according to Omdia officials. According to Statista forecasts, the demand for chips for artificial intelligence systems will triple by 2025 compared to the past, and by 2030 it will grow 13 times. Many of the companies that are not yet ready to expand their production capacities are constructing new factory buildings in advance and waiting for the right time to start installing the equipment.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

Add Comment

Click here to post a comment