Special for Infobae of New York Times.
SAN FRANCISCO — Months ago, computer chipmakers seemed to be on top of the world.
Customers couldn’t get enough of buying those little bits of silicon, which function as the brains of computers and are needed in almost every device with an on/off switch. Demand was so strong — and America’s dependence on a foreign manufacturer so worrying — that Democrats and Republicans agreed in July to a $52 billion grant package that included aid to build new chip factories in the United States.
US chipmakers such as Intel, Micron Technology, Texas Instruments and GlobalFoundries have promised big expansions in domestic manufacturing, betting on a growing need for their products and the possibility of federal subsidies.
However, supplies of some semiconductors are piling up lately, which might be good news for consumers, but not for industry executives. His bold investment plans are running up against a sudden and unexpected slowdown in consumer demand for electronics, new US restrictions on sales to customers in China, rising inflation and the unusual prospect of a shortage. simultaneous use of some chips and an excess of others.
That has left chipmakers, who had been waiting for huge demand and huge opportunity, suddenly grappling with huge challenges. Many of the companies now face complex questions about whether and when to ramp up production, amid uncertainty over how long the current slowdown in sales may last.
“Six months ago, I would have said we were in this hyper-growth phase,” said René Haas, CEO of Arm, the British company whose chip technology powers billions of smartphones. Now, he noted, “we are on a pause.”
Fears of a slide, which have caused semiconductor stocks to misalign this year, are evident in recent earnings announcements from chipmakers. South Korea’s SK Hynix reported a 20 percent drop in revenue on Wednesday, saying its memory chip business “is facing unprecedented deterioration in market conditions.” Intel provided more evidence of a decline in its third-quarter results on Thursday, including a 20 percent drop in revenue and a $664 million charge to cover cost-cutting measures that are also expected to include job cuts. of work.
The Biden administration struck its own blow this month with a sweeping set of restrictions aimed at preventing China from using American chip-related technology. The measures restrict the sale of some advanced chips to Chinese customers and prevent US companies from helping China develop some types of chips.
That hurts semiconductor companies like Nvidia, which makes graphics chips used to run artificial intelligence applications in China and elsewhere. The Silicon Valley company, which is already suffering from a sharp decline in sales of video game apps, recently estimated that the US restrictions could reduce revenue for its current quarter by about $400 million.
The sanctions may further hit companies that sell chipmaking equipment, which in recent years relied heavily on sales to Chinese factories.
Lam Research, which produces tools that etch silicon wafers to make chips, estimated that China’s limitations would cut its 2023 revenue by $2 billion to $2.5 billion. “We’ve lost some very profitable customers in the China region, and that will continue,” Doug Bettinger, Lam’s chief financial officer, said during an earnings call last week.
Applied Materials, the world’s largest maker of chip creation tools, also disclosed that sales would be affected by the restrictions. On Wednesday, another chip development tools maker, KLA, said its revenue next year may be down $600 million to $900 million as sales of equipment and services to some customers in China decline.
Concern about foreign competition is nothing new in the semiconductor industry, known for its boom-and-bust cycles. But rarely has it faced a player as powerful as Taiwan Semiconductor Manufacturing Co., whose factories on the island churn out chips designed by the likes of Apple, Amazon, Nvidia and Qualcomm.
China claims Taiwan as its own territory, posing a potential risk to chip supply. That has helped fuel recent bipartisan support for US chip legislation, which President Joe Biden has pushed hard.
Biden traveled to Ohio last month to attend the groundbreaking of a $20 billion manufacturing campus for Intel. On Thursday, he visited a site near Syracuse, New York, where Micron has pledged to spend up to $100 billion over 20 years on a massive complex to make memory chips, a project he called “one of the most significant investments in the history of the United States”.
Those plants will be needed at some point, industry executives say. However, they are now dealing with the sudden and sharp drop in demand for chips.
The problem is especially serious with processors and memory chips, which perform calculations and store data in personal computers, tablets, smartphones and other devices.
Those products were all the rage when consumers were working from home during the coronavirus pandemic. But that boom has cooled, with sales of personal computers falling 15 percent in the third quarter, according to calculations by International Data Corp. The research firm also predicted cell phone sales would drop 6.5 percent this year. . Demand has been tempered by inflation as well as China’s prolonged COVID lockdown, according to analysts.
At the same time, chip inventories are piling up. Scared by shortages, computer makers bought more components than they ended up needing, said Dan Hutcheson, a market researcher at TechInsights. When customer demand dried up, they began to cut orders.
“You see multiple issues converging,” said Syed Alam, who heads Accenture’s global high-tech consulting practice, including semiconductors.
Handel Jones, CEO of International Business Strategies, predicts that total chip industry sales will continue to grow 9.5 percent this year. But he expects revenue to decline 3.4 percent to $584.5 billion next year. Last year he predicted steady annual growth for the chip industry from 2022 to 2030.
Among the red flags are Intel’s second quarter results, announced in July. The company posted an unusual loss and a 22 percent drop in revenue, blaming its own mistakes and customers running down chip inventories.
At Micron, the environment also changed rapidly. In May, the company made an upbeat presentation at an investor event in San Francisco about long-term demand for its memory chips. The following month, he warned of slowing demand and falling chip prices.
In September, the company reported a twenty percent drop in fourth-quarter revenue. It also cut planned spending on factories and equipment by almost 50 percent in the current fiscal year.