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In addition to the exploding sales of artificial intelligence chips this year the rest of the semiconductor industry continues to look good — either with solid sales growth or sales set to rebound in the second half. AI chip sales are only about 5%-10% of the $600 billion industry.
Inventory levels are back under control for memory chips, after a huge glut last year. Supply chains are stable, for the most part. And there’s strong order growth, a good predictor of future sales. It doesn’t seem as though anything will stop Wall Street’s love affair with chip firms, especially after Nvidia’s recent results beat expectations. Even chipmakers in the automotive and industrial space, now slogging through weak sales, should rebound in sales by year-end. That’s expected to reignite investor interest. Notable risks aren’t likely to dim the outlook but continue to loom, such as geopolitical tensions, the war in Ukraine and U.S. political dysfunction.
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Keep an eye on India’s effort to expand its nascent semiconductor industry, according to a recent report by the Information Technology and Innovation Foundation — a tech think tank. The report stems from a federal tech initiative to work with India.
Among the many factors in India’s favor are massive government support, a robust chip workforce, a huge domestic market and competitive labor costs. Many U.S. chip firms already have R&D offices in India, including Intel, Nvidia, and Qualcomm.
Recent developments include memory chipmaker Micron setting up shop, with an assembly and testing facility opening in 2024. AMD is investing $400 million over five years. Plus, the government recently OK’d India’s first major chipmaking plant. A rising Indian chip sector would ease U.S. reliance on Taiwan and China.
Despite promising signs, there are many challenges, ranging from taxation and regulations to transportation and energy. Still, India seems serious about chips
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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