The amount of capital expenditure by the 10 major semiconductor companies in 2024 will decline for the second consecutive year. How is the current state of demand and overproduction for AI impacting the industry as a whole?
🟦 Global semiconductor investment declines for the second year in a row: AI demand, overproduction, and stalling for EVs and smartphones
In fiscal 2024, capital expenditures by the world’s 10 major semiconductor companies in the United States, Europe, China, South Korea, Taiwan, and Japan were reported to be 123.3 billion dollars (approximately 19.4 trillion yen), down 2% from the previous year, marking the second consecutive year of decline. This is a downward revision of $9.5 billion, a reversal from the original forecast of a 6% year-over-year increase. This is due to the concentration of demand for AI and the sluggish demand for semiconductors for electric vehicles (EVs) and smartphones.
- Intel
- Initial plan: Over $30 billion
- Corrected: Approximately 20% reduction, adjusted to $25 billion
- Samsung Electronics
- For the first time in five years, investment fell below the previous year’s level.
- Reduction: 1% down to around $35 billion
- SK Hynix
- Continue to actively invest in AI-related semiconductors
- The company is currently planning to strengthen its production capacity for AI semiconductors.
- TSMC
- Investment plan: more than $30 billion
- Objective: Strengthen manufacturing capabilities to meet the growing demand for AI semiconductors.
🟦 Reasons behind the decline in investment
Post-pandemic demand shifts are prompting a rethink of investments. Demand for semiconductors for digital devices, which surged due to the new corona disaster, plummeted in reaction. In addition, the sluggish Chinese economy and sluggish growth in the EV market have caused a cooling of the automotive and industrial semiconductor markets.
Excess production capacity is also a factor in the reduction in investment. According to industry group SEMI, the global semiconductor factory utilization rate is only about 70%, below the healthy 80%. Under these circumstances, the effectiveness of investment in fields other than AI semiconductors is declining, and companies are being forced to make cautious investment decisions.
🟦 Summary
While global semiconductor investment has declined for the second year in a row, companies that capture the demand for AI are actively investing money. This trend reflects the overcapacity and diversification of demand faced by the industry, and signals a new phase in the semiconductor market.
In recent years, it has been impressive to see companies that have successfully captured the demand for AI in the semiconductor industry increasing their performance. However, these trends are subject to change, and there is a risk of over-reliance on the AI field. It is important for each company to invest in a wide range of industries in addition to AI in parallel to establish a system that can flexibly respond to future market fluctuations.
