Chip makers from Samsung to AMD see ‘breathtaking’ earnings plunge as recession looms

Name: AI chip maker ordered by US government to halt exports to China
Uploaded: 2022-10-07T05:48:04.000Z
Duration: 1 min 36 s
Description: AI chip maker ordered by US government to halt exports to China

Samsung reported a 32 per cent dive in operating income, while AMD said it will miss its earlier forecast by about US$1 billion

In addition to slowing demand for consumer electronics, the semiconductor industry is also grappling with US export restrictions against Chinese companies

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A Samsung flag flutters outside the company’s building in Seocho, Seoul. Photo: AFP

Bloomberg

Published: 1:48pm, 7 Oct 2022Updated: 9:34am, 8 Oct 2022

Signs are piling up that the tech downturn may be deeper and longer-lasting than feared.

After years of record capital spending, chip makers are warning on a weekly basis that demand is sputtering. In the latest sign of trouble, Samsung Electronics and Advanced Micro Devices (AMD) reported disappointing results within hours of each other that widely missed projections.

Samsung – the world’s largest memory chip maker – reported a 32 per cent dive in operating income, while PC-processor chip maker AMD said it will miss its earlier forecast by about US$1 billion. Analysts’ reactions ranged from “breathtaking” to “Uff-da!”.

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AI chip maker ordered by US government to halt exports to China

Those numbers followed grim comments from memory makers Micron Technologies and Kioxia Holdings, which are slashing spending and output in a bid to stabilise plummeting prices. AMD shares fell, spurring losses in chip gear suppliers from Tokyo Electron to client PC makers including Lenovo Group on Friday. Disco Corp, whose equipment grinds, polishes and dices chips, tumbled 7.1 per cent – losing the most ground in almost 16 months.

“It seems end demand has likely deteriorated markedly in recent weeks, and end customers appear to be aggressively draining inventory,” Bernstein’s Stacy Rasgon said. The cut in AMD’s client revenue “is admittedly a bit breathtaking”.

Taiwan Semiconductor Manufacturing Co posted a roughly 48 per cent surge in quarterly revenue to about NT$613 billion (US$19.4 billion) – at the top range of its guidance in US dollar terms – helped by its growing clout as the world’s most advanced maker of chips. The downtrend in demand may not have been fully reflected in the numbers, especially given the sharp depreciation of the Taiwan dollar, Haitong International Securities analyst Jeff Pu said.

Weaker-than-expected demand for consumer electronics is hitting companies along with surging shipping and materials costs. Cost-cutting has become the new norm across the tech industry, and businesses that hoarded chips during the pandemic are now opting to cancel or postpone orders and tap inventory.

The semiconductor industry is also grappling with export restrictions from the US government, which is ratcheting up pressure on its allies to prevent shipment of cutting-edge chips to a growing list of Chinese companies, as it seeks to contain the Asian country. That is hampering business for chip makers from AMD to Nvidia in the world’s biggest semiconductor market.

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