Chipmakers signal supply glut easing but demand recovery still slow

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 industry remains gloomy. While demand for chips to support generative AI has rapidly increased since OpenAI's ChatGPT was launched late last year, the sector still accounts for a small fraction of overall chip demand and is crimping corporate spending on servers, as some companies prioritise investment in AI. Both Samsung and SK Hynix said China's reopening failed to live up to expectations that it would revive the smartphone market, and that they were extending production cuts of NAND memory chips, widely used in smartphones to store digital data. "Advanced AI servers have significantly higher leading-edge logic, memory and storage content versus traditional servers, and every incremental 1% penetration of AI servers and data centres is expected to drive $1 billion to $1.5 billion of additional investment," Lam CEO Tim Archer said on a conference call with analysts. SK Hynix said demand for AI server memory had more than doubled in the second quarter compared to the first quarter.