Headline, December 25 2022/ ''' '' CHIPS CHART CHUGS '' '''

''' '' CHIPS CHART

 CHUGS '' '''

''YOU SEE MULTIPLE ISSUES CONVERGING,'' said Syed Alam, who leads Accenture's global high tech consulting practice, including semiconductors.

FEARS OF A SLUMP - WHICH HAVE CLOBBERED SEMICONDUCTOR stocks this year, are evident in recent earnings announcements from chip makers.

South Korea's Hynix reported a 20 percent drop in revenue and said its business of memory chips ''is facing an unprecedented deterioration in market conditions.''

Intel provided more evidence of a downturn in its third quarter results, including a 20 percent drop in revenue and a $664 million charge to cover cost-cutting measures expected to include job cuts.

The Biden administration just later delivered its own blow with sweeping restrictions aimed at hobbling China from using U.S. technology related to chips. The measures restrict sales of some advanced chips to Chinese customers and prevent U.S. companies from helping China develop some kinds of chips.

THAT HURTS semiconductor companies like Nvidia, which makes graphic chips used to run artificial intelligence applications in China and elsewhere.

The Silicon Valley company, already suffering from a sharp sales decline for video games applications, recently estimated that the U.S. restrictions would probably reduce revenues in the current quarter by about $400 million.

The sanctions may bite even harder at companies that sell chip-making equipment, which relied heavily in recent years on sales to Chinese factories.

LAM RESEARCH, which produces tools that etch silicon wafers to make chips, estimated that the China limitations would reduce its 2023 revenue by $2 billion to $2.5 billion.

''We lost some very profitable customers in the China region, and that's going to persist,'' Doug Bettinger, Lam's chief financial officer, said during an earnings call in October.

APPLIED MATERIALS, the biggest maker of chip manufacturing tools, also said sales would suffer because of the restrictions.

Another maker of chip manufacturing tools, KLA, said its revenue next year was likely to shrink by $600 million to $900 million as it reduces equipment sales and services to some customers in China.

Worries about foreign competition are nothing new in semiconductors, an industry known for boom-and-bust cycles. But it has rarely faced a player as potent as the Taiwan Semiconductor Manufacturing Company, whose factories on the island churn out chips designed by companies including Apple, Amazon, Nvidia and Qualcomm.

China claims Taiwan as its own territory, creating a potential risk to chip supplies. That helped drive the recent bipartisan support for U.S. chip legislation, which was heavily pushed by President Biden.

He trekked to Ohio recently for the ground breaking for a $20 billion Intel manufacturing campus.

And then Mr. Biden visited a site near Syracuse, N.Y., where Micron has vowed to spend as much as $100 billion over 20 years on a large complex to build memory chips, a project called ''one of the most significant investments in American history.''

Those plants will be needed at some point, industry executives said. But they are now grappling with the sudden and sharp decline in chip demand.

The problem is particularly acute in processors and memory chips, which perform calculations and store data in personal computers, tablets, smartphones and other devices.

Those products were hot commodities as consumers worked from home during the coronavirus pandemic. But that boom has now cooled, with PC sales dropping 15 percent in the third quarter, according to estimates by International.

Data Corporation

The research firm also predicted that smartphone sales would fall 6.5 percent this year. Demand has been tempered by inflation as well as lengthy Covid lockdowns in China, analysts said.

At the same time, inventories of chips piled up. Computer makers spooked by the shortage bought more components than they ended up needing, said Dan Hutcheson, a market researcher at the firm TechInsights. When customer demand dried up, they started slashing orders.

Handel Jones, chief executive at International Business Strategies, predicts that total sales for the chip industry will still grow 9.5 percent this year. But he expects revenue to decline 3.4 percent to $584.5 billion next year.

Last year, he had predicted steady yearly growth for the chip industry from 2022 until 2030.

The Honour and Serving of the Latest Global Operational Research on Chips, Markets and the Future, continues. The World Students Society thanks author Don Clark.

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