From Intel to Samsung Electronics, global chip manufacturers believe that the oversupply of semiconductors is coming to an end, while artificial intelligence (AI) chips are advancing rapidly in the emerging technology boom.

Due to global economic weakness, high inflation, and rising interest rates, corporate customers and consumers are cutting back on spending, and all major chip markets, including smartphones, personal computers, and data centers, have seen a contraction this year.

This led to an unprecedented oversupply in the chip market, leading to the operating losses of Samsung and SK Hynix, the world's two largest memory chip manufacturers, in the first half of the year, reaching a record 15.2 trillion won (12 billion US dollars) in total.

However, data from research firm Canalys shows that this oversupply situation has begun to ease, mainly due to production cuts, and the decline in personal computer shipments slowed to 11% in the June quarter, compared to a 30% decline in the first two quarters.

The smartphone market is also improving. According to research firm Counterpoint, smartphone shipments decreased by 8% in the second quarter of this year, while shipments in the first quarter decreased by 14%.

Woohyun Kim, Chief Financial Officer of SK Hynix, said on the financial report conference call this week that demand is gradually recovering. But it also indicates that the recent improvement in personal computer shipments is mainly driven by promotions and low-end models, which means its impact on the recovery of chip demand is limited.

The current market turnaround is mainly due to the rise of the artificial intelligence industry. The demand for chips supporting generative artificial intelligence is rapidly increasing, but the industry still accounts for a small portion of the overall chip demand. Moreover, due to some companies prioritizing investment in artificial intelligence, they are reducing their spending on servers.

The overall situation of the industry has improved

Intel Corporation announced on Thursday that it unexpectedly turned losses into profits in the second quarter, with revenue and net profit exceeding the company's own highest range, and released stronger than expected third quarter performance guidance.

Intel CEO Pat Gelsinger stated in a conference call with analysts that the company expects all its business units to continue to be "weak" until the end of the year, and server chip sales will not recover until the fourth quarter. He also stated that cloud computing companies place more emphasis on GPUs for artificial intelligence rather than Intel CPUs.

Samsung Electronics' net profit fell by 84% in the second fiscal quarter, but it was better than the average expectation. At present, the Science and technology in South Korea giant believes that the memory chip industry is experiencing a downturn.

The world's largest manufacturer of storage chips, smartphones, and televisions said on Thursday that it is expected that global demand for technology products and semiconductors will gradually recover in the second half of the year.

Samsung Electronics said that although the demand for high-performance chips in the field of artificial intelligence was stronger than expected, the demand for chips of smartphone manufacturers was delayed in recovery, and customers made inventory adjustments due to weak global demand for IT products, which still affected the performance.

Nomura analysts stated in a recent report that they believe Samsung Electronics' profits are expected to improve starting from the third quarter, as the semiconductor cycle may have bottomed out and rebounded against the backdrop of industry wide production cuts. At the same time, the booming development of the artificial intelligence field is currently driving demand for more advanced process storage chips produced by the company.