Chipmakers signal supply glut easing but demand recovery still slow

Global chipmakers are celebrating the beginning of the end of a semiconductor supply glut, but the wider outlook for demand remains gloomy.

From Intel to Samsung, global chipmakers are celebrating the beginning of the end of a semiconductor supply glut, but the outlook for demand from customers outside the artificial intelligence (AI) industry remains gloomy.

All the major markets for chips - smartphones, PCs and data centres - have shrunk this year, as both corporate customers and consumers scale back spending amid a weak global economy, high inflation and rising interest rates.

This has created an unprecedented oversupply of commodity chips, causing a record combined 15.2 trillion won ($12 billion) first-half operating loss for the world's two largest memory chipmakers, Samsung and SK Hynix.

This glut, however, has started to ease largely due to production cuts and as a decline in PC shipments eased to 11% in the June quarter compared to a 30% slump in each of the previous two quarters, data from tech analysts Canalys showed.

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The smartphone market is also improving, with cellphone shipments falling 8% in the June quarter, versus 14% in the first quarter, according to research firm Counterpoint.

"Demand is recovering very gradually," Woohyun Kim, chief financial officer at SK Hynix, said on an earnings call this week.