while some sink others only spend
The world has been broken for just over a year. The pandemic closed it, by opening it completely after China’s failure with COVID after more than two years, it is causing a market as key today as that of semiconductors to end up collapsing. The best example is what we are experiencing today, where the semiconductor giant is losing investors, while its competitors do not stop spending money to expand their capacity. What the hell is going on with the chips? Why is the semiconductor market so broken?
The balance has broken and the problem is that there are no weights on either side. The balance is about to break and everything points towards a monumental bump for the big ones, where the small ones are getting the maximum profitability and are going to close the GAP a bit.
TSMC sees its accounts in jeopardy, it is the first to see the semiconductor market broken
Bekrshire, one of the world’s largest investment firms and funds run by Warren Buffet, pulled out, if not all, then almost all of its bet on TSMC after just 4 months, in a totally anomalous movement for this firm. Now others have followed suit, like Generation Investment Management, except for the fact that the investment has been withdrawn entirely. selling all shares.
And of course, why are they doing this after only one quarter and losing a huge amount of money after sales? Well, for several reasons. The first is the fact that TSMC bases its revenue on the most profitable nodes and these are the leading edge ones. But the sector is at a minimum. Neither Intel, nor AMD, nor NVIDIA, Qualcomm or Apple are pulling the bandwagon, rather the contrary, they are lowering. TSMC is losing its customers to Intel and Samsung and on top of that there is another factor that is weighing: the increasing pressure in the Taiwan Strait from China and the eye that the US has on there.
Investors do not see it clearly and prefer to lose a little money (billions) to a catastrophe that could be the result of an imminent war. The tension is almost at the limit. What is happening in the meantime on other continents?
Micron continues with layoffs and stops the pace
Well yes, another 5% of the workforce that will go to the streets and unless everything continues to worsen, it will be the last batch of layoffs in 2023, but no more will be ruled out if everything worsens. If we add to this that the production of NAND Flash and DRAM has stopped at 20%that the transition to its new 1 gamma node is already planned and delayed for 2025, that in 2024 it wants to build some more FAB and it is in the air and that the 232-layer 3D TLC NAND They’re going to be with us for two more years… It doesn’t look good for the Americans. In addition, next month they expect a drop in the 300 million.
As a result of this and after getting rid of Texas Instruments, the company is now planning a new FAB on its own, investing in Utah a whopping 11 billion dollars after buying IMFlash, a FAB in Lehi that in 2006 belonged to Intel and Micron itself. Texas Instruments’ idea is to take that FAB and build another right next to it to end up uniting them as a single complex.
will be manufactured 65nm and 45nm chips, 800 new jobs and the entire project will be completed in 3 years. But this is only one part of Texas Instruments’ complex plan, since it already has 4 new factories under construction in Texas and they will be operational in 2025all for a cost of no less than 30 billion.
Infineon bets on Germany
In our continent we have mixed fortunes. Intel still does not move with Germany and maintains the need to receive 10 billion if Europe wants the high-performance Super FAB and TOP nodes on its soil, everything after leaving Vietnam at the last moment. Meanwhile and ahead on the right we have Infineon, a large manufacturer of industrial chips for motherboards and other components, as well as for cars.
Dresden, once again, will be the city chosen to host a new FAB of 5 billion, while Germany rubs its hands and the rest of Europe does not receive even the crumbs. So, recapitulating everything seen, why while Intel, Samsung or TSMC are withdrawing from the market and cutting their own and external investments, the others do not stop spending money?
The semiconductor market is broken
The answer is not simple, but political or military tensions aside, which are influencing a lot, the forecasts for the semiconductor and chip sector are different. In the sector of servers and PCs, the ceiling has been reached. In the first there is still some margin because there is a need due to the greater volume of data that is generated each year and the push of AI.
In the second, the PC and laptops, the prices are so inflated, people are so tired and also, the political and economic tension is affecting everyone, so the demand is being stamped with a reality that, as 2023 progresses, it will be harder and harder it seems, although it is resisting. This will force central banks to be tougher and stricter with interest rate hikes, and it is possible that they will end up accepting that the inflation will be stationary at a value of 4 or 5%something that will be the last resort.
On the other hand, the sector of chips for household appliances, the Internet of things, cars and annexes is booming due to the modernization of all of them. There is a need for cheap, reliable, and bulk chips, where few require advanced lithographic processes. Hence investments according to demand. The problem is that they depend on energy sector and he does not give up.
If we add to this that they are falling into the trap that the PC and server industries fell into… It seems that their future will also be uncertain and they will face cuts like these, but later, surely for 2024 or 2025, depending on when the demand falls. As we can see, the scenario is different, but it all seems that they will go through the same phases, even if they are temporarily different, a moment for the semiconductor market that makes it completely broken.