In the spring of this year, Americans were full of fantasies about their chip industry. In March, a dumper and bulldozer were under construction in Lijin County, Ohio, USA, where a chip factory will be built in the future. Intel will set up two “wafer factories” there, with a cost of about 20 billion dollars. In his State of the Union address, President Biden said that this land is a “land of dreams”. He sighed that this is “the cornerstone of the future of the United States”.
The epidemic situation over the years has proved the importance of chips to modern life. The demand for a variety of chip driven technologies is still rising, and these technologies are used in most fields today. The US Congress is considering the chip bill, which promises to provide US $52 billion worth of subsidies to domestic industries to reduce the dependence of the US on foreign chip factories and support projects such as Intel’s Ohio factory.
However, six months later, these dreams looked like nightmares. Demand for silicon seems to be declining as fast as it grew during the epidemic.
Micron Technologies Chip Factory
According to the website of The Economist on October 17, at the end of September, the quarterly sales of Micron Technologies, a memory chip manufacturer headquartered in Idaho, fell by 20% year on year. A week later, California chip design company Chaowei Semiconductor lowered its sales forecast for the third quarter by 16%. Bloomberg reported that Intel released its latest quarterly report on October 27. A series of bad results may continue, and then the company plans to lay off thousands of employees. Since July, about 30 of the largest chip companies in the United States have lowered their revenue forecasts for the third quarter from $99 billion to $88 billion. So far this year, the total market value of semiconductor enterprises listed in the United States has decreased by more than 1.5 trillion dollars.
According to the report, the chip industry is also famous for its periodicity at the best time: it will take several years to build new capacity to meet the growing demand, and then the demand will no longer be white hot. In the United States, the government is promoting this cycle. So far, the consumer goods industry has felt the most strongly about the cyclical recession. Personal computers and smartphones account for nearly half of the $600 billion annual chip sales. Due to the extravagance during the epidemic, consumers affected by inflation are buying fewer and fewer electronic products. Gartner expects smartphone sales to fall 6% this year, while PC sales will fall 10%. In February this year, Intel told investors that it expected that the demand for personal computers would grow steadily in the next five years. However, it is obvious that many purchases during the COVID-19 epidemic have been advanced, and such companies are adjusting their prospects.
Many analysts believe that the next crisis spread may be in other areas. The panic buying during the global chip shortage last year resulted in excess silicon stocks for many automobile manufacturers and commercial hardware manufacturers. New Street Research estimated that from April to June, the relative sales of industrial enterprises’ chip inventory was about 40% higher than the historical peak. PC makers and car companies are also well stocked. Intel Corporation and Micron Technologies attributed part of the recent weak performance to high inventories.
Oversupply and weak demand are already affecting prices. According to the data of Future Vision, the price of memory chips has dropped by two fifths in the past year. The price of logic chips that process data and are less commercialized than memory chips dropped by 3% over the same period.
In addition, the Wall Street Journal of the United States reported that the United States has invested heavily in the chip field, but the world has already implemented incentives for chip manufacturing everywhere, which also makes the efforts of the United States more likely to become a mirage. South Korea has a series of strong incentives to encourage chip investment of about 260 billion dollars in the next five years. Japan is investing about $6 billion to double its chip revenue by the end of this decade.
In fact, the American Semiconductor Industry Association, an industry trade group, also recognized that about three quarters of the world’s chip manufacturing capacity is now distributed in Asia. The United States accounted for only 13 per cent.
Post time: Nov-03-2022