Inflation and geopolitical tensions, among others, are being cited as key factors for depressed demand. istock

Global chip industry stares at slowdown; Investments in India can continue

Chipmakers such as Taiwan Semiconductor Manufacturing Company (TSMC) and Hon Hai Precision Industry Co., better known as Foxconn, may be forced to reassess their investments in the coming quarters as they take a cautious stance to respond to global headwinds such as rising inventory . with concerns about rising inflation and geopolitical tensions.

TSMC on Thursday reported an 80% jump in net profit for the September quarter to $8.8 billion. However, even though the results beat market estimates, CEO C.C. Wei said net capital spending for the rest of FY23 was cut 10% to $36 billion. He also said there could be a “likely downturn” in the global semiconductor market and TSMC is “not immune” to the downturn despite its market dominance.

Foxconn also advised caution in its outlook for the rest of the year when announcing September sales. While it reported record monthly revenue of $25.9 billion last month, up 83% sequentially, the company cited “inflation dynamics, the pandemic and supply chain” as key factors.

Industry analysts say the plan to cut capital spending among global supply chain builders is not unexpected as inventories have risen to very high levels due to subdued consumer demand. Navkendar Singh, associate vice president for client devices at Indian market research firm International Data Corporation (IDC), said the slowdown projection is in line with declining demand globally. “Even businesses are spending cautiously and orders are being delayed or canceled as companies freeze hiring and reassess growth plans,” he said.

A slowdown in demand is also expected in the global information technology (IT) services sectors for the next quarter. While India’s software majors Tata Consultancy Services, Infosys, HCL Technologies and Wipro reported revenue growth, analysts saw declines in new and active business at most IT firms, suggesting a cautious attitude among businesses.

However, stakeholders in the Indian semiconductor industry are confident that this will not have a direct impact on India’s ability to attract investment in its nascent semiconductor industry.

Vivek Tyagi, chairman of the India Electronics and Semiconductor Association (IESA), said there could be some slowdown in investment by global chipmakers in the coming quarters.

“However, it is important to note that the country’s semiconductor investment would not come on the back of high-end chips, which is where the slowdown would occur. For example, the automotive sector in India has demand for chips that are between 28nm (nanometers) and 90nm die size – and this sector is likely to continue with declining demand,” he said.

Tyagi also said that India’s semiconductor industry is currently in the phase of attracting investment in chip factories, which is largely a long-term endeavour. “As we see it, the slowdown in demand and caution in investment expansion would remain for the next 18 to 24 months, after which the global supply chain would stabilize. India could attract assembly, test, marking and packaging (ATMP) and outsourced semiconductor assembly and test (OSAT) facilities,” he said.

The Government of India’s Semiconductor Manufacturing Scheme (PLI) offers a 50% cash benefit to firms investing in semiconductor equipment, with no minimum cap on investment.

Tyagi said this, coupled with the government’s land and employment benefits, could see India continue to receive investment in the semiconductor sector, albeit at a slightly reduced pace. Rajeev Khushu, consultant and board member of IESA, said Bengaluru already has more than 80 companies associated with semiconductor manufacturing.


I am Sanjit Gupta. I have completed my BMS then MMS both in marketing. I even did a diploma in computer software and Digital Marketing.

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