Chipmakers Reduce Investment Plans by A$15.36 Billion

The leading 10 semiconductor companies globally are scaling back their planned capital expenditures by billions. This adjustment comes as they face declining demand from electric vehicle (EV) manufacturers and smartphone makers.

The global semiconductor market is predicted to reach a valuation of A$1.01 trillion in 2024, reflecting a 19% increase from the previous year, according to World Semiconductor Trade Statistics.

For the fiscal year 2024, the combined investment plans of these companies indicate a 2% drop in spending year-on-year, amounting to A$199.21 billion. This represents a reduction of approximately A$15.36 billion compared to the estimates made in May, as reported by Nikkei Asia.

Intel’s Investment Cuts

Intel has struggled significantly, experiencing a nearly 60% drop in its share price over the past year. The company has revised its investment figure to A$40.39 billion, down from a previously announced A$48.47 billion. In the three months leading up to September, Intel recorded a staggering net loss of A$26.82 billion (US$16.6 billion), primarily due to ongoing challenges in its chip foundry division.

Other Major Players Adjust Spending

Samsung Electronics has also cut its semiconductor investments for 2024 by 1%, bringing the total to approximately A$56.55 billion. This marks the first decline in its investment in five years. The company is currently facing challenges in keeping pace with its competitor SK Hynix, particularly in the development of high-bandwidth memory for AI applications.

As per the industry group SEMI, around 70% of global chip fabrication capacity is currently utilized, which is about 10% lower than the healthy levels expected for the industry.

Taiwan Semiconductor Manufacturing Co. (TSMC), a major player in the chip foundry market and a critical supplier of AI graphics processing units to Nvidia, has projected its 2024 capital expenditures to exceed A$48.5 billion. Meanwhile, SK Hynix has plans to invest 103 trillion won (A$113.5 billion) over the next five years, focusing on memory chips for artificial intelligence.

Geopolitical Influences on Investments

U.S. restrictions on chip exports to China have also influenced the reduction in semiconductor investments. Recently, Nvidia has publicly criticized the Biden administration's latest export restrictions that impact American technology in over 150 countries.

Ned Finkle, Nvidia's vice president of government affairs, expressed concern that the new regulations could hamper innovation and economic growth globally. He stated, "The Biden Administration’s new AI Diffusion rule threatens to derail innovation... This sweeping overreach would impose bureaucratic control over how America’s leading semiconductors and software are designed and marketed, hindering competition and threatening the technological edge that the U.S. has earned."

semiconductors, investment, China