Chipmakers have had a difficult year-and-a-half. A COVID-era supply shortage and a boom in demand for electronics from work-from-home consumers supercharged company profits. But now, the hangover: High inflation moderated demand for new computers and smartphones, while manufacturers and retailers stockpiled goods to prepare for future shortages. That led to a glut of chips right as customers started cutting orders.
But now, a series of earnings from chipmakers show that the market may be about to turn around. On Tuesday, South Korean electronics manufacturer Samsung reported narrower losses in its semiconductor business, at $2.7 billion for the three months ending September compared to $3.2 billion in each of the first two quarters of the year.
Customers are now ready to replace products purchased at the beginning of the pandemic, helping PC and mobile demand, Samsung said in a statement. The company is also optimistic that demand for its products will grow off the back of rising demand for generative AI products.
Overall, the South Korean conglomerate generated quarterly revenue of $49.95 billion, primarily from new smartphone releases and higher sales of its premium display products. Still, the figure is lower than the $56.88 billion reported this time last year.
Samsung isn’t the only chipmaker that’s forecasting a recovery. Last week, fellow Korean chipmaker SK Hynix reported $1.62 billion in quarterly losses, less than the previous quarter’s loss of $2.2 billion. (The company reported a net profit of $814.5 million this time last year). The firm credited “strong demand” for AI for the improved performance in its latest quarterly report.
Other chipmakers are feeling more positive about the consumer electronics market.
In mid-October, Taiwan Semiconductor Manufacturing Company CEO C.C. Wei said the company was seeing “early signs of stabilizing in PCs and smartphones” during an earnings call. And following the release of its earnings last week, Intel’s revenue from its client computing division, which makes chips for PCs, has increased each quarter since the start of 2023. (Both TSMC and Intel reported year-on-year drops in revenue, yet gave positive outlooks.)
Both Samsung and SK Hynix make the two main kinds of memory chips: NAND and Dynamic Random Access Memory chips, or DRAM. Both are found in products like servers, smartphones, and computers.
Samsung, SK Hynix, and U.S.-based Micron are the world’s top three manufacturers of memory chips. Said chips are important for AI applications, which require large amounts of data storage for algorithms to function efficiently.
