Semiconductor Subsidies?..."Global Top 10 Companies' Facility Investments Sharply Decrease"

$122 Billion Facility Investment by 10 Companies
Down 16% YoY... Largest Decline in 10 Years
Semiconductor Demand Slows Due to China's Economic Slowdown
Facility Investment Reduced to Prevent Oversupply

Capital expenditure on semiconductor equipment by the top 10 countries is expected to decline for the first time in four years. Although each country has actively supported semiconductor companies in attracting factories by distributing subsidies, companies have significantly reduced their investment scale due to China's economic slowdown and the impact of oversupply.

According to data estimated by the Nihon Keizai Shimbun on the 20th based on the capital investment plans of 10 semiconductor companies from the US, Europe, South Korea, Taiwan, and Japan, the investment amount of these 10 companies this year is expected to decrease by 16% from the previous year to $122 billion (approximately 163.4312 trillion KRW). Last year's capital expenditure reached a record high of $146.1 billion, but Nihon Keizai stated that the investment scale is expected to turn to a decline for the first time in four years. The decrease in investment compared to the previous year is also expected to be the largest in 10 years.

In the case of memory semiconductors, capital investment is estimated to decrease by 44% compared to the previous year, and non-memory semiconductor capital investment is also expected to decline by 14%.

By company, six companies including the US's Micron Technology, GlobalFoundries, Western Digital, Taiwan's TSMC, South Korea's SK Hynix, and Japan's Kioxia have reduced capital investment. Intel decided to reduce its data center investment scale, and Micron decided to cut wafer investment, reducing capital expenditure by 40% compared to the previous year. SK Hynix also plans to increase its production cut by 5-10%, reducing capital investment by more than 50% compared to the previous year. On the other hand, Samsung Electronics decided to maintain its capital investment at a level similar to the previous year despite the downturn in the memory semiconductor market.

The semiconductor industry has reduced capital investment because semiconductor prices are declining due to the continued oversupply. For NAND flash and DRAM semiconductors used in laptops and data center servers, inventory has accumulated, and prices have fallen by more than 40% compared to the same month last year since the beginning of this month. At the end of June, the semiconductor inventory assets of nine companies also recorded $88.9 billion, a 10% increase compared to the previous year.

[Image source=Yonhap News]

Nihon Keizai explained that the oversupply of semiconductors was largely caused by the US-China technological hegemony competition, which led countries to competitively build production systems and increase investments.

China's economic slowdown, which is expected to reduce semiconductor demand, is also cited as a factor for companies cutting capital investment. As the economic outlook in China, the main consumer base for PCs, becomes uncertain, companies have started to reduce factory-related investments. Patrick Gelsinger, CEO of Intel, stated in the July earnings announcement that "China's economic recovery is delayed."

However, some believe that the decrease in capital investment is only a temporary phenomenon and that semiconductor demand will increase in the mid to long term. It is forecasted that semiconductor demand will explode due to electric vehicles and artificial intelligence (AI) development. Consulting firm McKinsey & Company predicted that the global semiconductor market size will grow from about $600 billion in 2021 to $1 trillion by 2030, an increase of 70%.

Accordingly, it is expected that companies that have reduced capital investment will resume mass production of semiconductors once supply and demand stabilize. Yuichi Koshiba of Boston Consulting Group said that semiconductor companies that cut investments are "building factories first and preparing to mass-produce at the optimal timing," and predicted that "once inventory adjustments settle, movements to build semiconductor supply chains will become active again."

This content was produced with the assistance of AI translation services.