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Why The Recovery Rate Of Chip Production Is Still Moderate?

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Due to slow consumer spending and private sector investments, legacy chips are losing popularity.

The international demand for semiconductors has been growing at a rapid scale with the popularity of AI chips and other electronic products. On the other hand, the demand for legacy chips has plummeted. According to world semiconductor trade statistics, the market for international semiconductor chips increased by 18.3 percent in Q1, up from 17.8 percent in the first quarter and 11.6 percent in last year’s fourth quarter.

The investments in GenAI by the US tech giants has helped the global expansion of the semiconductor industry. For instance, TSMC, which is furnished with the world’s largest chip foundry, soared high in the Q2, jumping to 40.1 percent compared to the previous year. The company’s high-performance computing segment, which includes GPUs, has recorded most of the sales, which accounted for 52 percent. 

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The memory segment in Samsung Electronics witnessed a revenue escalation of 140 percent in the second quarter, while its biggest competitor SK Hynix witnessed 130 percent revenue. The memory from the data centers has been witnessing massive demand, which is ultimately driving up the prices. TrendForce claims that in the coming third quarter, the prices of NAND will increase by 5 percent to 10 percent, while DRAM will see 8 to 13 percent increase. 

According to the analysts, as the market in China is a bit weak now, the recovery rate in the semiconductor industry is moderate. Due to slow consumer spending and private sector investments, legacy chips are losing popularity. For instance, Renesas Electronics, which is well-known for manufacturing semiconductors for industrial applications, has seen sales dip by 3 percent. 

Renesas President Hidetoshi Shibata added that the delivery rate of silicon wafers has reduced by 8.9 percent in the second quarter. Moreover, at Shin-Etsu Chemical, 300-millimeter wafers used for advanced semiconductors are in the recovery stage, but the 200-mm wafers used for producing legacy chips are facing most of the challenges from the end-use applications. 

The semiconductor companies are now involved in the rat-race of investing in advanced chips. In this quarter, chip equipment sales by Japanese suppliers increased by 31.8 percent. Industry body SEMI already predicted in July that the international market for equipment will increase by 3.4 percent this year. Nagato Omori, executive vice president at Japanese smartphone parts supplier Murata Manufacturing said, “We hope [demand] starts to move a little in the second half of 2024, or the start of 2025.”

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