Leading Chipmakers Brace For Slump As Chip Demand Falls Rapidly Amid Global Economic Slowdown

Leading global chipmakers are bracing for slump in demand amid a global economic slowdown.

The sales of devices such as PCs and smartphones have slowed rapidly, leading to a slowdown in the semiconductor boom of the past few years.

PC demand has receded after a burst driven by the remote work boom during COVID pandemic. It has weakened further by widespread global inflation and China's economic slowdown.

According to a US research firm, smartphone shipments were down 10 per cent on the year last quarter.

Even data centres and high-end handsets, which had stayed strong, are showing weakness, reports Nikkei Asia.

Global semiconductor sales in July fell year over year for the first time in 32 months with a 2 per cent fall, and the drop widened to 4 per cent in August, data from World Semiconductor Trade Statistics (WSTS) shows.

Further, the US restrictions on chip exports to China may further affect the demand for chips adversely.

Leading US semiconductor giant Intel on Thursday reported an 85 per cent year-on-year drop in net income for the third quarter on a 20 per cent fall in sales.

Memory chips maker including Western Digital and Samsung Electronics also saw a drop in their income.

While Western Digital's net income plummeted 96 per cent on the year last quarter, Samsung Electronics saw a 49 per cent fall in operating profit in its semiconductor segment.

Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest chip boundary, remained an outlier and logged an 80 per cent jump in net profit last quarter, mostly due to its near monopoly on advanced 5 nanometer chips.

However, the demand for slightly older 7 nanometer TSMC chips has weakened.

The semiconductor sector serves as a barometer for the global economy since it takes months to make the chips. A sudden slowdown in the sector strongly hints a worldwide recession in the offing.

In August, WSTS cut its growth forecasts for the semiconductor market by 2.4 percentage points to 13.9 per cent this year, and by 0.5 point to 4.6 per cent next year.

However, amid worsening global economic conditions, UK research firm Omdia has an even gloomier outlook, predicting a 0.2 per cent contraction in the semiconductor market in 2023.