Toh most consumersComputer chips are all the same: magical artifacts that allow smartphones to perform miraculous feats. Instead, savvy technologists see a diverse range of highly specialized products of human ingenuity, each with its own unique features and functions. Until recently, investors in semiconductor companies behaved more like uninitiated consumers, flocking to virtually every chipmaker in the expectation of supernatural profits. As the pandemic-era chip boom fades, they look more and more like the most demanding nerds.
In particular, investors distinguish between companies whose fortunes are tied to “logic” chips, which process information, and makers of “memory” chips, which store it. Although demand for all kinds of semiconductors has cooled this year, the memory market feels considerably frostier than the logic market. That, in turn, has opened up a geographic divide between the world’s silicon superpowers, South Korea and Taiwan, and between their respective semiconductor champions, Samsung and tsmc.
South Korea, home to the world’s largest memory chip producers, exported just $5 billion worth of such devices in August, a 23% decrease compared to a year ago (see chart 1). Across the East China Sea, by contrast, Taiwanese foundries producing logic chips are humming. tsmcAugust sales soared 59% year over year, to a monthly record of $7 billion or so. As a result, account namely Insights, a research firm, is likely to see the company jump from a relatively distant third place in the global semiconductor sales rankings to number one, displacing Samsung from the top spot and overtaking Intel, the US chip champion. by just one hit.
Share prices of most chipmakers around the world have fallen from their peaks in the pandemic, fueling demand for all manner of digital devices leaving shoppers, workers and fun-seekers stranded on their couches. . Now it looks like Samsung’s market capitalization never happened. That of its closest rival in memory chips, South Carolina Hynix, also from South Korea, is also down from its pre-pandemic level. tsmcThe market value of, by contrast, remains comfortably higher, despite this year’s drop (see chart 2).
a reason to tsmcThe outperformance of is that the semiconductor shortage of the past two years has been concentrated in logical processors rather than silicon memory. This delay, combined with tsmc‘s Its dominant position in the high-end logic chip market allows it to control capacity and set prices for its products, explains Vincent Tsui of Gavekal Research, an analyst firm.
South Korean companies’ products are too commoditized and their market too fragmented to allow them to do the same. They have been pouring money into expanding their logical businesses; Last year, Samsung said it would mass-produce next-generation logic chips with two-nanometer (billionths of a meter) transistors starting in 2025. But as the cycle turned in the first half of this year, it has reduced its capital. – spending plans. (Despite primarily making logic chips, Intel has also struggled as a result of strategic and technological mistakes.)
The rise and fall of memory chips is a relatively predictable phenomenon: demand increases, which drives up prices; chipmakers respond by investing in capacity; new production lines arrive a year or two later, just as demand cools; prices plummet and chipmakers go purely for investment. So far, logic chips have avoided a drop as deep as memory thanks in part to the sharpness of the shortage in the past two years. Still, observes David Wong of Nomura, an investment bank, over time the logical slowdown “may last longer and be deeper than expected; it is possible that we will see a kind of second leg”.■
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