Interest in AI masks the current rickety nature of the chip industry. While AI-related companies ventures are showing some impressive quarterly figures, revenue from the automotive and industrial sector are lagging behind.
The chip sector has many sides and is currently moving in many directions. The AI hype is responsible for a lot of eye-catching revenue growth, contrasting with the relative stagnation seen in the PC and smartphone markets. That’s been the case across 2023, with stabilization seemingly having been reached. However, VP and senior equity analyst at CFRA Research Angelo Zino stated in conversation with Bloomberg that he was uncertain about the sustainability of this trend going into 2024.
In contrast, Zino suggested that demand from both the automotive and industrial sectors will trough “within the next four months.”
The chip shortage gives way to excess inventory
By the middle of this year, the end of the automotive chip shortage was already in sight, S&P Global noted. What was unique about the COVID-19 pandemic, they asserted, was that all suppliers were facing shortages, whereas this normally only applies to a fraction of the supply. Meanwhile, the situation as it was before 2020 has returned. Specifically, automakers now actually have more than enough inventory, drastically reducing the formerly enormous lead times for desired processors.
Yesterday, Broadcom presented its quarterly results, which Bloomberg had pre-identified as a helpful benchmark for the health of the chip sector as a whole. This appeared to confirm the existing picture of the chip industry. Indeed, CEO Hock Tan stated that investments in “accelerators and network connectivity for AI by hyperscalers” drove the positive numbers that the company presented.
Storage and video memory also play a crucial role in driving AI, meaning its manufacturers stand to benefit from the existing interest. However, Samsung, for example, is still waiting for a visible increase in demand overall, which shows that the macroeconomic malaise still persists.
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