Chipmakers Cut Investment Plans as AI Drives Growth

The global semiconductor industry is facing a slowdown in investment as demand weakens in key markets like smartphones and electric vehicles, Nikkei Asia reports. While AI applications continue to drive growth, overall capital expenditure is expected to fall.

The 10 largest global chipmakers have reduced their collective capital spending plans for fiscal 2024 by 2% year-on-year to $123.3 billion, according to Nikkei's analysis. This represents a $9.5 billion reduction from their initial estimates made in May.

"Investment plans for each company's fiscal 2024 compiled by Nikkei show an aggregate 2% decline year over year to $123.3 billion," states Nikkei. "That represents a drop of about $9.5 billion from their estimates as of May, which had called for a 6% year-on-year increase."

This downward revision reflects lingering weakness in demand beyond AI applications. In fiscal 2023, chipmakers had already scaled back investment as demand for smartphones and other devices cooled from pandemic-era highs, while China's economic slowdown impacted the industrial semiconductor market.

Intel's investment has been particularly affected, falling to $25 billion from an initial target of over $30 billion. The company recently reported a record quarterly net loss of $16.6 billion, driven in part by losses in its chip foundry business. Nvidia, meanwhile, is outpacing Intel in AI chip sales.

Samsung Electronics' semiconductor-related investment for 2024 dipped 1% to about $35 billion, marking the first decline in five years. The company has fallen behind competitor SK Hynix in developing high-bandwidth memory for AI and is struggling to improve yield rates for its top-tier chips.

The slowdown in the automotive sector is also impacting investment. Infineon Technologies, a leading power semiconductor manufacturer, invested $2.9 billion in the fiscal year ended September, down 8% from its initial forecast.

Despite these challenges, companies focused on AI are investing more aggressively. Taiwan Semiconductor Manufacturing Co. (TSMC), which holds a near-monopoly on AI GPU production for Nvidia, expects to spend over $30 billion in 2024. SK Hynix plans to invest 103 trillion won ($70.2 billion) over the next five years in areas including AI memory chips.

The global semiconductor market is expected to grow 19% year-on-year to $626.8 billion in 2024, according to World Semiconductor Trade Statistics. However, this growth is heavily skewed toward AI, with other segments like automotive and industrial chips lagging.

The slowdown in investment is also affecting China, where the pace of new factory construction has slowed. "The pace of investment in new factories in China has slowed," says Akira Minamikawa of research company Omdia. "Global semiconductor investment will probably fall in 2025 as well."