Chipmakers Reduce Investment Plans By A$15.36 Billion

The ten largest semiconductor companies in the world are cutting back on billions of dollars they had planned to invest. This reduction comes as they face declining demand from makers of electric vehicles (EVs) and smartphone manufacturers.

In 2024, the global semiconductor market was valued at A$1.01 trillion, which represents a 19% increase from the previous year, according to the World Semiconductor Trade Statistics.

However, the investment plans for the fiscal year 2024 from these companies have shrunk by about 2%, bringing the total to approximately A$199.21 billion. This marks a decrease of around A$15.36 billion compared to estimates made in May, as reported by Nikkei Asia.

Intel has been particularly hard hit, with its share price dropping nearly 60% over the last year. The company has slashed its investment from over A$48.47 billion to A$40.39 billion. Intel also reported a record quarterly net loss of $16.6 billion (A$26.82 billion) for the three months ending in September, largely due to losses within its chip foundry operations.

Samsung Electronics has also seen a noteworthy decrease in its semiconductor investments for 2024, with a 1% cut bringing the total to about A$56.55 billion. This marks the first drop in their investments in the last five years. The company is facing challenges in keeping up with SK Hynix in the development of high-bandwidth memory essential for artificial intelligence (AI) applications, as well as improving yield rates for its most advanced chips.

The semiconductor industry is currently operating with approximately 70% of its fabrication capacity in use globally, which is about 10% below the level considered healthy.

Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC), which has a dominant position in producing AI graphics processing units for Nvidia, has set its capital spending for 2024 at over A$48.5 billion. On the other hand, SK Hynix plans to invest 103 trillion won (A$113.5 billion) over the next five years, focusing on memory chips for AI.

The recent restrictions imposed by the United States on chip exports to China are believed to further inhibit investment in chip production.

Nvidia has publicly criticized the Biden administration's latest export controls on American technology, which affect more than 150 countries. Ned Finkle, vice president of government affairs at Nvidia, stated, "The Biden Administration now seeks to restrict access to mainstream computing applications with its unprecedented and misguided 'AI Diffusion' rule, which threatens to derail innovation and economic growth worldwide." Finkle expressed concerns that the measures, while marketed as anti-China, do not enhance U.S. security but instead impose unnecessary controls on how U.S. technology is designed and sold globally, potentially undermining its competitive edge.

investment, semiconductors, economy