The chip industry is booming again, but only for companies building AI infrastructure

[Alfonso Maruccia]

The big picture: The unprecedented supply chain issues the technology industry has been navigating are affecting everyone and everything. According to industry trade associations, silicon wafer production is climbing again, even as demand for the consumer devices that once drove the industry cools considerably.

A recent report by Semi's Silicon Manufacturers Group found that the silicon wafer industry is growing once again. The quarterly analysis confirmed that global shipments for silicon wafers increased 13.1% compared to the same quarter a year earlier, rising from 2,896 million square inches (MSI) to 3,275 MSI. Shipments declined 4.7% quarter-over-quarter, which Semi characterizes as a typical outcome of industry seasonality.

Silicon wafers are the foundational substrate of modern chip manufacturing: the thin, disc-shaped platforms, measuring up to 300mm in diameter, on which CPUs, memory chips, and virtually every other semiconductor device are fabricated. Their health as a market indicator tends to telegraph broader industry direction well before finished products hit shelves.

What's driving the rebound isn't consumers. Semi SMG chairman Ginji Yada points squarely at AI and data center infrastructure as the dominant force behind sustained wafer demand, with foundries redirecting capacity toward high-bandwidth memory and computing silicon for hyperscaler customers.

PC and smartphone shipments were notably soft in the first quarter, a direct consequence of memory manufacturers reallocating capacity to service AI workloads rather than consumer-facing products.

Yada also noted that AI data centers are affecting the demand for silicon wafers needed to manufacture logic (computing) devices and memory chips. Furthermore, the unusual demand spike is now extending to power management devices as well. As recent reports and industry insider sources have confirmed, chipmakers and foundry corporations are still unable to keep up with provisioning requests coming from the AI industry.

Semi also highlighted the uneven recovery silicon wafer demand is experiencing across different trade areas. The industrial semiconductor segment is improving the most, helping device manufacturers digest the wafer inventories that were previously piled up.

Semi is an industry association representing thousands of companies across the semiconductor, electronics design, and manufacturing supply chain. SMG is its subsidiary responsible for collecting and distributing market intelligence. Its reports are meant to promote customer awareness of the many hurdles facing today's silicon industry – challenges that grow more acute as the whole sector increasingly bets on a single point of failure, AI, for its future revenue prospects.

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The chip industry is booming again, but only for companies building AI infrastructure

 

[Squid Surprise]

This is news?!? We’ve known this for months already…

Kind of reminds me of those educational “studies” that find that affluent kids do better in school than non-affluent ones…

 

[The Talking Tech]

A Lopsided economy where only those with plenty of money and those involved in inside trading will keep benefiting

 

[noel24]

I wish Them all well (not really), but They have to be aware They are playing with market sentiment. If They play the game of not investing in the supply to limit the risk and boost revenue, They are risking the market switching against Them. Superior BetaMax lost to VHS, Chicken Tax killed more economical trucks in US, the same in EU where high excise tax on fuel killed interest in US big cars. Electronics companies are killing interest in consumer electronics. And AI somehow doesn't gain social approval. Might be the dead end.

 

[Theinsanegamer]

This is news?!? We’ve known this for months already…

Kind of reminds me of those educational “studies” that find that affluent kids do better in school than non-affluent ones…

You should actually read those studies sometime instead of just handwaving them. There is more to education then just money. Correlation =! causation.

My favorite one that people want to ignore is the one from mississippi that allowed a school practically unlimited funding per student for three decades, and despite all the money thrown at them...nothing changed. Because behavior plays a far bigger role then money in education.

A Lopsided economy where only those with plenty of money and those involved in inside trading will keep benefiting

You're free to invest in tech stocks. My stocks have done absolute gangbusters over the last decade.

 

[Squid Surprise]

You should actually read those studies sometime instead of just handwaving them. There is more to education then just money. Correlation =! causation.

There is more certainly… but it makes a HUGE impact…

My favorite one that people want to ignore is the one from mississippi that allowed a school practically unlimited funding per student for three decades, and despite all the money thrown at them...nothing changed. Because behavior plays a far bigger role than money in education.

The money put into education isn’t what the studies are for… it’s the money the students (and their families) have!

Poor students from poor families do worse in schools than rich kids from rich families…

 

[Theinsanegamer]

There is more certainly… but it makes a HUGE impact…


The money put into education isn’t what the studies are for… it’s the money the students (and their families) have!

Poor students from poor families do worse in schools than rich kids from rich families…

Poor rural kids score higher in tests then the wealthier urban districts. Clearly its not wealth that is determining these scores. And poor immigrant kids do better then either other group.

There is a LOT more to student performance then wealth. Which you would know if you actually read those studies instead of handwaving them.

 

[Hecate91]

I wish Them all well (not really), but They have to be aware They are playing with market sentiment. If They play the game of not investing in the supply to limit the risk and boost revenue, They are risking the market switching against Them. Superior BetaMax lost to VHS, Chicken Tax killed more economical trucks in US, the same in EU where high excise tax on fuel killed interest in US big cars. Electronics companies are killing interest in consumer electronics. And AI somehow doesn't gain social approval. Might be the dead end.

Except what are we supposed to switch to as consumers? Every company has gone head first into the AI hype, regardless of losing money in the consumer market, or dropping out of it completely such as Micron did.
The end goal seems to be not owning any electronics at all, when these companies would rather rent you a basic computing device to connect to a server in the cloud. Companies don't want you owning a car either as kill switches are going to be implemented into new vehicles.

 

[Squid Surprise]

Poor rural kids score higher in tests then the wealthier urban districts. Clearly its not wealth that is determining these scores. And poor immigrant kids do better then either other group.

Not sure what studies you’re referring to… every study I’ve seen shows the opposite…

There is a LOT more to student performance than wealth. Which you would know if you actually read those studies instead of handwaving them.

There is… but it still matters…

Maybe do a simple google (or AI) search for “are there studies that show that affluent students do better in schools than non-affluent “

You’ll find that is one of the most consistent findings in studies from virtually every country on this planet…

https://record.umich.edu/articles/research-shows-how-wealth-begets-educational-disparity/

Education Gap Grows Between Rich and Poor, Studies Say | Center for Education Policy Analysis

Education was historically considered a great equalizer in American society, capable of lifting less advantaged children and improving their chances for success as adults. But a body of recently published scholarship suggests that the achievement gap between rich and poor children is widening, a...

cepa.stanford.edu

Rich students get better SAT scores—here’s why. - School of Social Policy & Practice

Researchers have repeatedly found that wealthy students enjoy significant advantages throughout the college application process, and that income greatly

sp2.upenn.edu

www.danielwillingham.com/daniel-willingham-science-and-education-blog/why-do-rich-kids-do-better-in-school-than-poor-kids

 

[pnntmp]

WTF does it mean "but only for companies building AI infrastructure" ???
The chip industry is booming, period.
That's good for everyone long term. Even though current prices, driven by the colossal demand, are definitely bad for the end users, this will not continue indefinitely. At some point the consumer prices will drop, probably sharply, because of the vastly increased production capacity.

 

[noel24]

Except what are we supposed to switch to as consumers? Every company has gone head first into the AI hype, regardless of losing money in the consumer market, or dropping out of it completely such as Micron did.
The end goal seems to be not owning any electronics at all, when these companies would rather rent you a basic computing device to connect to a server in the cloud. Companies don't want you owning a car either as kill switches are going to be implemented into new vehicles.

Lot's of people I know lost interest in gaming after second Crypto and then COVID crises. Me, I stopped watching half of tech portals in the last half a year. Nothing really new to read. No new tests, no components to upgrade at reasonable price-to-performance ratio. My last vg purchase was Phantom Liberty. Havn't finished It. Games will not survive on Their own, without hardware.
Believe or not, after chinese Evergrande collapse, in My part of Europe, wood prices went down. I bought set of Makita and Bosch tools, making My furniture true wood. Still not cheap, but lots of fun. What I'm saying, personal electronics is a phase, it will pass. Have You heard of smartphones 20 years ago? There were none. I was born 1980, I know no World without PC and I genuinely wonder what We're gonna have in 20 years from now, instead of it. And smarthone. Mobile games are massive today, but it's such a short time fun. Cannot imagine making lost revenue for PC gaming.

 

[Hecate91]

Lot's of people I know lost interest in gaming after second Crypto and then COVID crises. Me, I stopped watching half of tech portals in the last half a year. Nothing really new to read. No new tests, no components to upgrade at reasonable price-to-performance ratio. My last vg purchase was Phantom Liberty. Havn't finished It. Games will not survive on Their own, without hardware.
Believe or not, after chinese Evergrande collapse, in My part of Europe, wood prices went down. I bought set of Makita and Bosch tools, making My furniture true wood. Still not cheap, but lots of fun. What I'm saying, personal electronics is a phase, it will pass. Have You heard of smartphones 20 years ago? There were none. I was born 1980, I know no World without PC and I genuinely wonder what We're gonna have in 20 years from now, instead of it. And smarthone. Mobile games are massive today, but it's such a short time fun. Cannot imagine making lost revenue for PC gaming.

This is a good point. And I agree, I've lost most interest I had in tech in general since COVID, hardware prices have only remained high, while increases in performance per generation have diminished to many launches being pointless.
And now thanks to AI, prices are even higher, SSD price per GB has skyrocketed, NAND density has completely stagnated, also while manufacturers move to lower quality QLC drives for the consumer market.
Game publishers will have to account for hardware people currently own, and optimize games, but the mainstream game industry is at a point where I would have no sympathy if it crashed because companies are pushing for PC gamers to be on the latest high end hardware.

I suppose it may time to look for another hobby, PC gaming just isn't worth it anymore for what every company involved with AI is asking, and I don't expect cost to come down anytime soon as only AI hardware is being prioritized, with a majority of chips being sold for AI, unless the AI bubble pops.
Although I doubt most people will vote with their wallets, many still bought hardware at massively inflated cost during COVID, or would be willing to use a cell phone for as long as possible. A lot of daily tasks almost require you to have a PC or cell phone as well, it's more difficult to pay bills or do banking without one.

 

[OortCloud]

No tired of hearing about the thousands of negative ways AI is affecting peoples lives.