Also memory chips can suffer from oversupply

As the pandemic-induced chip shortage subsides, a glut is looming as manufacturers and governments are pouring record sums into increasing capacity.

Much of the new investment is concentrated in processors, a strategic area of ​​competition for states trying to create champions of artificial intelligence. The memory market is in better shape. Storage chips contributed 28% of the $595 billion in total chip revenue in 2021, according to Gartner. Although prices have fallen, manufacturers of these chips, such as Samsung, have weathered the recession with aplomb. The Korean group posted a 12% year-on-year increase in operating profit to nearly $11 billion in April-June.

The strength of the dollar helped, as well as the resilience of data center demand. What helps most is that only Samsung and two other firms, compatriot SK Hynix and Micron of the US, dominate the memory market. When demand falls and inventories rise, the troika can easily curb supply to preserve margins. SK Hynix said yesterday that it is studying a considerable reduction in its capital spending plans for 2023; Samsung’s property, plant and equipment spending was down 14% in the first half from a year earlier.

It may not last. Well-funded new Chinese players like Yangtze Memory Technologies are eager to get in. It is aggressively expanding into so-called NAND memory chips, and could double its market share to 10%, according to Nikkei. Other governments are willing to recover domestic manufacturing. The US Senate has approved a bill that allocates 52,000 million dollars to the local production of chips. Until now, Washington has focused on memoryless chips, but authorities in other countries are paying attention to storage. Earlier in the week, Japan announced that it would subsidize its local memory champion with $680 million. Disruption is in sight.