Chipmakers Celebrate End of Chip Surplus
2023-08-02
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1From Intel in the United States to South Korea's Samsung, producers are celebrating the beginning of the end of the chip surplus.
2Still, the expectations for demand from buyers outside the artificial intelligence (AI) industry remain weak.
3All the major markets for chips - smartphones, computers and data centers - have decreased this year.
4Both companies and people have reduced spending during a weak international economy, high inflation and rising interest rates.
5The decreased demand has created a large oversupply of chips.
6The result: a record combined $12 billion first-half operating loss for the world's two largest memory chipmakers, Samsung and SK Hynix of South Korea.
7This time of oversupply, however, has started to ease.
8Chip companies have cut production.
9And a decline in personal computer shipments eased to 11 percent in the June quarter compared to a 30 percent decrease in each of the previous two quarters, data from the research company Canalys showed.
10The smartphone market is also looking better, with cellphone shipments falling 8 percent in the June quarter, versus 14 percent in the first quarter, says research firm Counterpoint.
11"Demand is recovering very gradually," Woohyun Kim, chief financial officer at SK Hynix, said on an earnings call last week.
12Intel chief Pat Gelsinger recently said an oversupply in server central processing units (CPUs) will continue until the second half of the year.
13He also said that data center chip sales will decline in the third quarter before recovering in the fourth quarter.
14A slow recovery in China, the world's biggest chip buyer, is also lowering market expectations.
15Both Samsung and SK Hynix said China's reopening failed to live up to expectations that it would bring back the smartphone market.
16The two companies said they were lengthening production cuts of NAND memory chips, widely used in smartphones to store digital data.
17American chipmaker Texas Instruments, which does a lot of business in China, predicted third-quarter earnings and profit below targets last week.
18"China was roughly half of sales at the end of fiscal 2022, so China has the largest impact on TI's (Texas Instruments) business," said Logan Purk of the investment business Edward Jones.
19Demand for chips to support generative artificial intelligence has increased since OpenAI's ChatGPT was launched late last year.
20Still, AI only accounts for a small amount of overall chip demand.
21Manufacturers of the equipment used to make chips such as KLA Corporation and Lam Research in the U.S. are early winners of the AI boom.
22Both companies predicted quarterly earnings above Wall Street estimates last week.
23I'm John Russell.
1From Intel in the United States to South Korea's Samsung, producers are celebrating the beginning of the end of the chip surplus. Still, the expectations for demand from buyers outside the artificial intelligence (AI) industry remain weak. 2Chip markets 3All the major markets for chips - smartphones, computers and data centers - have decreased this year. Both companies and people have reduced spending during a weak international economy, high inflation and rising interest rates. 4The decreased demand has created a large oversupply of chips. The result: a record combined $12 billion first-half operating loss for the world's two largest memory chipmakers, Samsung and SK Hynix of South Korea. 5This time of oversupply, however, has started to ease. Chip companies have cut production. And a decline in personal computer shipments eased to 11 percent in the June quarter compared to a 30 percent decrease in each of the previous two quarters, data from the research company Canalys showed. 6The smartphone market is also looking better, with cellphone shipments falling 8 percent in the June quarter, versus 14 percent in the first quarter, says research firm Counterpoint. 7"Demand is recovering very gradually," Woohyun Kim, chief financial officer at SK Hynix, said on an earnings call last week. 8Intel chief Pat Gelsinger recently said an oversupply in server central processing units (CPUs) will continue until the second half of the year. He also said that data center chip sales will decline in the third quarter before recovering in the fourth quarter. 9A slow recovery in China, the world's biggest chip buyer, is also lowering market expectations. 10Both Samsung and SK Hynix said China's reopening failed to live up to expectations that it would bring back the smartphone market. The two companies said they were lengthening production cuts of NAND memory chips, widely used in smartphones to store digital data. 11American chipmaker Texas Instruments, which does a lot of business in China, predicted third-quarter earnings and profit below targets last week. 12"China was roughly half of sales at the end of fiscal 2022, so China has the largest impact on TI's (Texas Instruments) business," said Logan Purk of the investment business Edward Jones. 13Artificial intelligence 14Demand for chips to support generative artificial intelligence has increased since OpenAI's ChatGPT was launched late last year. Still, AI only accounts for a small amount of overall chip demand. 15Manufacturers of the equipment used to make chips such as KLA Corporation and Lam Research in the U.S. are early winners of the AI boom. Both companies predicted quarterly earnings above Wall Street estimates last week. 16I'm John Russell. 17Joyce Lee reported on this story for Reuters. John Russell adapted it for VOA Learning English. 18____________________________________________________ 19Words in This Story 20chip - n. a very small piece of hard material (called silicon) in a computer or other device that contains many electronic circuits 21quarter - n. a period of three months 22gradually - adv. happening in a slow way over a long period of time 23fiscal -- adj. of or relating to money and especially to the money a government, business, or organization earns, spends, and owes