Chipmakers Reduce Capital Spending by A$15.36 Billion

The world’s leading semiconductor manufacturers are slashing their planned capital expenditures significantly as they react to a drop in demand from electric vehicle (EV) makers and smartphone producers.

According to the World Semiconductor Trade Statistics, the global semiconductor market was valued at A$1.01 trillion in 2024, representing a 19% increase compared to the previous year.

Investment forecasts for the fiscal year 2024 are expected to decrease by 2% year-over-year, totaling A$199.21 billion. This compares to earlier estimates made in May and reflects a cut of about A$15.36 billion, as reported by Nikkei Asia.

Among the major companies, Intel has been particularly hard hit, with its share price dropping nearly 60% over the last year. The company has revised its investment down from over A$48.47 billion to A$40.39 billion. Recently, Intel reported a staggering net loss of $16.6 billion (approximately A$26.82 billion) for the three months ending in September, largely due to heavy losses in its chip foundry operations.

Meanwhile, Samsung Electronics has announced a 1% reduction in its semiconductor investments for 2024, now estimated to be about A$56.55 billion. This marks the company’s first decrease in investment in five years, driven in part by falling behind its competitor SK Hynix in the race for advanced AI memory technologies and difficulties in producing yield rates for its leading-edge chips.

Data from the industry group SEMI indicates that approximately 70% of global chip manufacturing capacity is currently in use, which is about 10% below the level deemed optimal for healthy operations.

On another front, Taiwan Semiconductor Manufacturing Co. (TSMC), which dominates the production of AI graphics processing units for companies like Nvidia, has projected its capital expenditure for 2024 to exceed A$48.5 billion. Likewise, SK Hynix has ambitious plans to invest 103 trillion won (around A$113.5 billion) over the next five years, focusing on developing memory chips tailored for AI applications.

The recent restrictions imposed by the US on chip exports to China are also believed to be contributing to the decline in investment plans for production capabilities. This week, Nvidia released a statement criticizing these new export restrictions put forth by the Biden administration, which targets access to mainstream computing applications across more than 150 nations.

Ned Finkle, vice president of government affairs at Nvidia, expressed concerns that the new “AI Diffusion” rule represents a major setback for innovation and economic growth worldwide. Finkle argued that while the rule aims to appear anti-China, it effectively undermines US security and threatens to harm America's technological edge by imposing bureaucratic control over semiconductor design and marketing globally.

semiconductors, investment, demand