To most shoppers, laptop chips are all the identical: magical artefacts that let smartphones to carry out miraculous feats. Expert technologists as a substitute see a various vary of extremely specialised merchandise of human ingenuity, every with their very own distinctive traits and performance. Until not too long ago traders in semiconductor corporations behaved extra just like the uninitiated shoppers, piling into just about all chipmakers with the expectation of conjuring up preternatural returns. As the pandemic-era chip increase turns to bust, they’re more and more coming to resemble the discerning nerds.
In explicit, traders are distinguishing between companies whose fortunes are tied to “logic” chips, which course of info, and the producers of “memory” chips, which retailer it. Although demand for every type of semiconductors has cooled this yr, the reminiscence market is feeling significantly frostier than the one for logic. That in flip has opened up a geographical divide between the world’s silicon superpowers, South Korea and Taiwan—and between their respective semiconductor champions, Samsung and tsmc.
South Korea, residence of the world’s largest producers of reminiscence chips, exported simply $5bn-worth of such gadgets in August, a lower of 23% in contrast with a yr in the past (see chart 1). Across the East China Sea, in distinction, the Taiwanese foundries churning out logic chips are buzzing away. tsmc’s August gross sales soared by 59% yr on yr, to a month-to-month file of $7bn or so. As a consequence, reckons ic Insights, a analysis agency, the corporate appears more likely to go from a comparatively distant third within the rating of worldwide semiconductor gross sales to primary, dislodging Samsung from the highest spot and overtaking Intel, America’s chip champion, at one fell swoop.
The share costs of most chipmakers worldwide are down since their peaks within the pandemic, which boosted demand for all types of digital gadgets by stranding consumers, staff and funseekers on their sofas. Now Samsung’s market capitalisation appears as if that covid-19 surge by no means occurred. That of its closest rival in reminiscence chips, sk Hynix, additionally of South Korea, is likewise again beneath its pre-pandemic degree. tsmc’s market worth, in contrast, stays comfortably larger, this yr’s slide however (see chart 2).
One purpose for tsmc’s outperformance is that the semiconductor shortages of the previous two years have been concentrated in logic processors moderately than in reminiscence silicon. That backlog, mixed with tsmc’s commanding place out there for cutting-edge logic chips, permits it to manage capability and set costs for its merchandise, explains Vincent Tsui of Gavekal Research, a agency of analysts.
The South Korean companies’ wares are too commoditised and their market too fragmented to allow them to do the identical. They have been pouring cash into increasing their logic companies; final yr Samsung mentioned it could be mass-producing state-of-the-art logic microprocessors with transistors measuring two nanometres (billionths of a metre) from 2025. But because the cycle turned within the first half of this yr it scaled again its capital-spending plans. (Despite mainly making logic chips, Intel has struggled, too, because of strategic and technological missteps.)
The increase and bust in reminiscence chips is a comparatively predictable phenomenon: demand rises, pushing up costs; chipmakers reply by investing in capability; new manufacturing traces arrive a yr or two later, simply as demand cools; costs crash and chipmakers rein in investments. So far logic chips have prevented as deep a droop as reminiscence thanks partially to the acuteness of the shortages over the previous couple of years. Still, observes David Wong of Nomura, an funding financial institution, over time the logic downturn “may go on longer and be deeper than expected; we may well see a sort of second leg”.■
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