The global shortage of semiconductors that has been hampering several industries looks to be subsiding, with major producers cutting their output due to a slump in demand.
Samsung Electronics has announced an operating profit drop of 69% to $3.4bn over the past three months, which represents an eight-year low, as a slowing global economy reduces demand.
The FT reports that several analysts agree with the theory that Samsung has been contributing to a supply glut with its increased spending on chip manufacturing.
Other memory chipmakers including Micron Technology, Kioxia Holdings and SK Hynix are slashing capital expenditure to adjust to the oversupply.
It is expected that the downturn in demand for semiconductors will worsen in the current quarter before a recovery in the second half.
According to Reuters, Morgan Stanley is saying that average selling prices of DRAM and NAND memory chips are down by 47% and 53% respectively this year.
China thinks again
China is said to be reassessing its own semiconductor strategy in the face of US restrictions to prevent it developing its own high performance chip sector, reports the Register.
Beijing is purportedly considering how to move beyond costly subsidies to semiconductor companies.
However, without access to Western technologies, China may have to shutter its plans to produce high-tech chips for the global market and focus on more established models for its own internal consumption.
Longer term consideration
Richard Gordon, practice vice president for semiconductors and electronics at Gartner, said: “I don’t think they will stop throwing money at the problem, but the bigger issue is that it requires expertise and time, and it will take a very long time.”
Meanwhile, Washington is struggling to convince Asian partners to join its pushback against Beijing.
Al Jazeera reports that its turn towards protectionism has caused jitters in the US-friendly chip powerhouses of South Korea and Taiwan, both of which have close economic links to China.
“To a good extent [the US] is very dependent on everybody, [and] everybody is very dependent on China,” said G Dan Hutcheson, vice chair of TechInsights.
Hutcheson added that there are scenarios where competition over chips could compel countries to withhold exports of other items, such as electronics or pharmaceuticals.
The US is ramping up its trade relations with Taiwan after a slow start under president Biden, reports the FT.
Terry McCartin, the US’s top official responsible for trade with China will lead a delegation of trade and economic officials to Taiwan from January 14-17.
The administration has been looking to expand the US economic relationship with Taiwan, and in June, Washington agreed to launch trade negotiations with Taiwan.
According to the USTR’s negotiating mandate, the talks will focus on a range of issues, including digital trade, agriculture and anti-corruption standards.