Global Semiconductor Industry adjusting to a new normal

  • By: Kaustav Roy
  • Date: August 17, 2022
  • Time to read: 3 min.

Heightened concerns over the demand for semiconductors, geopolitical tensions, and a global economic downturn are together creating a new normal for the semiconductor industry, which serves as a bellwether for the global economy.

Semiconductor chips power everything from smartphones to laptops, electric cars, televisions and even high-end medical devices and industrial machinery. 

After dealing with a booming demand and global shortages, the semiconductor industry is suddenly facing a downturn. The world’s biggest semiconductor, Taiwan Semiconductor Manufacturing Co (TSMC), and South Korean giants Samsung Electronics Co and SK Hynix Inc. have all hinted at delaying or holding back fresh investments while China is ramping up its semiconductor manufacturing capabilities. 

High stockpiles amid weakened demand

Stockpiles of semiconductor chips are at a record high and the increasing tense geopolitical environment is set to further exacerbate the situation. Inventory days, a barometer of how long it takes to sell and replace stockpiles, have never been higher at dedicated chip factories such as TSMC, United Microelectronics Corp. and Semiconductor Manufacturing International Corp. The three companies together account for 67% of the total capacity, according to Bloomberg data. 

Other chip makers such as Micron Technology Inc., Nvidia Corp., Intel Corp., and Advanced Micro Devices Inc. have all warned of weaker export orders. Intel Corp. and Micron are set to slash billions of dollars off capital spending, despite the US passing landmark law to increase production, according to a report in the Financial Times.

Memory chips are among the most vulnerable segments in the US $500 billion semiconductor market to the global economic performance. Semiconductor demand has not declined but has weakened, as consumers tighten their spending and tech companies freeze fresh hiring of staff. 

Chip makers focusing on older technology for mainstream use, such as components used in televisions, smartphones and computers, are seeing a more severe slowdown. However, industry leaders like TSMC and Samsung may expect brighter days ahead for their foundry services because they can offer their clients superior manufacturing processes for high-end applications like artificial intelligence (AI) and 5G mobile communication. 

This advantage reduces the risk of holding higher inventory for these companies. Samsung and HK Hynix control roughly two-thirds of the global memory market. Memory is loosely tied to other types of semiconductors built by companies such as TSMC and Nvidia, which is the biggest maker of graphics processing units that are used in video graphics and machine learning systems. 


Since semiconductor chip industry is considered as the bellwether of the global economy, it is not surprising that geopolitical tensions are also influencing the dynamics of the semiconductor chip manufacturing industry. 

Taiwan, home to a fifth of the global semiconductor chip making capacity, has started beefing up its defenses and is preventing Taiwanese chip engineers from working in Mainland China while putting restrictions on Chinese companies operating in the island from hiring local talent.

China has been working hard to build its own semiconductor chip making prowess, especially after the US denied Huawei access to American hardware and components. China has been reportedly poaching chip engineers from Taiwan to beef up its own semiconductor chip manufacturing in the Mainland. 

Last week, the US has formally banned the export of four technologies tied to semiconductor manufacturing, as they are “vital to national security”, thereby crippling China’s semiconductor chip plans further. 

When the war in Ukraine started, one of the main goals of the US and Europe was to deny Russia access to the kind of chips needed to build aircraft and missiles or to modernize the economy. China quickly became a supplier to Russia but China is still not capable of producing the most advanced chips.

A war in Taiwan might deprive everyone from the latest generation of chips and this would lead to a worldwide industrial crisis and China will not be immune to it. The small island, which is the global leader in semiconductor chip making, could well be the geopolitical battleground for the war over semiconductor chips, which may ultimately decide the new world order of the future.  

Kaustav Roy

Author - Kaustav Roy

World Business Reporter - View All Articles
Kaustav is a freelance journalist covering business news from around the world. Kaustav joined InterSpaceReporter as a freelance journalist on Monday 15th August 2022.

Floods in Pakistan: an indicator of Climate Change

Previous Post

Floods in Pakistan: an indicator of Climate Change

Next Post

Schmidt angry with Bosnian politicians! Total rubbish!

Schmidt angry with Bosnian politicians! Total rubbish!