The chip boom is over–or at least coming to an end.
Gartner has cut its outlook for revenue growth in 2022 to just 7.4%. That’s down from a forecast of 14% growth for chip revenue three months ago. Garner sees chip revenue falling 2.5% in 2023.
And you don’t have to take the word of market watchers at Gartner.
South Korean chip giants Samsung Electronics and SK Hynix have signaled plans to cut capital spending. (Memory chips are among the most vulnerable segments in the $500 billion semiconductor market to global economic performance, and Samsung and SK Hyinx control roughly two-thirds of the global market for memory chips. Taiwan Semiconductor Manufacturing (TSM), the largest contract manufacturer of chips, has said it is planning similar cuts
In recent weeks, major chip manufacturers Micron Technology (MU), Nvidia (NVDA), Intel (INTC), and Advanced Micro Devices (AMD) have warned of weaker export orders.
To be clear, nobody is talking about an end to all growth–just a big slowdown. Which will be a problem given rising supply. Next year, demand for DRAM is likely to rise by 8.3%, the weakest growth on record, TrendForce told Bloomberg. But Trendforce sees supply up 14.1% in 2023.
Signs are that trade is already starting to deteriorate. Korea’s technology exports slipped in July for the first time in more than two years, with memory chips leading the falls. Semiconductor inventories piled up in June at the fastest pace in more than six years.
I sold my position in Advanced Micro Devices (AMD) out of my Jubak Picks Portfolio last week. Yesterday, August 17, I sold my positions in Taiwan Semiconductor Manufacturing (TSM) and NXP Semiconductors (NXPI) out of the Jubak Picks portfolio. My loss on the Taiwan Semiconductor position since January 18, 2022, is 33.69%. My loss on the NXP position since May 26, 2021, is 13.16%.
I continue to hold Taiwan Semiconductor in my long-term 50 Stocks Portfolio. That position is under review for a future post. As are positions in chip equipment manufacturers Applied Materials (AMAT) and AMSL Holdings (ASML). Posts on those positions coming soon as well.
I also continue to hold shares of NXP in my Volatility Portfolio. Expect a post on that position in the coming days.
The other chip stock to look at here is Nvidia (NVDA), which is due to report earnings on August 24.
