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Texas Instruments, one of world’s largest chip makers, worries industry will make too many semiconductors

  • Amid a surge in investment to expand production capacity, chip makers fear profits will take a hit when global demand subsides
  • Analysts question whether chip makers are seeing the first signs of a slowdown in the notoriously cyclical industry

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The entire semiconductor industry is cranking up investments to meet growing demand for chips around the world. Photo: Reuters
Chip makers from Taiwan to the United States are cranking up production to address semiconductor shortages that have hammered carmakers and other customers, as they try to emerge from the coronavirus pandemic.
Now that unprecedented surge in investment is fuelling fears the semiconductor industry will overshoot, adding so much capacity in the years ahead as demand subsides that profits will take a hit.

In the latest sign of concern over demand, Texas Instruments (TI), one of the largest makers of chips, warned that revenue for the third quarter could fall short of some analysts’ estimates. Sales will be US$4.4 billion to US$4.76 billion in the period ending in September, the company said, compared with analysts’ prediction of US$4.59 billion. The company’s shares fell about 4 per cent in extended trading.

The forecast was particularly puzzling because it came after TI, the world’s largest maker of analogue and embedded processors, reported a 41 per cent surge in second-quarter revenue. It led to a barrage of questions from analysts on why the company is not more optimistic and whether we are seeing the first signs of a slowdown in the notoriously cyclical industry.

The entrance to US chip maker Texas Instruments’ plant in Richardson, Texas, is seen on June 9, 2021. Photo: TNS
The entrance to US chip maker Texas Instruments’ plant in Richardson, Texas, is seen on June 9, 2021. Photo: TNS

Management cautioned that TI could not anticipate whether demand is peaking or whether growth at the current levels is sustainable.

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