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Key takeaways

  • Samsung's chip division saw a surprising decline from the previous quarter.
  • Advanced Micro Devices (AMD) reported slower-than-expected growth in AI sales, following Samsung Electronics' announcement that demand for advanced chips was slowing.
  • Semiconductor production in South Korea fell 3 percent in September, following an 11 percent increase in the previous month.

Concerns about the artificial intelligence (AI) sector increased this week. Advanced Micro Devices (AMD) reported disappointing results and revealed slower-than-expected growth in AI sales. This followed Samsung Electronics ' announcement that demand for advanced chips for mobile devices and PCs was declining.

Samsung's third-quarter earnings report showed a surprising drop in the company's chip division from the previous quarter. Nevertheless, overall profits slightly exceeded Wall Street forecasts. The report also indicated that smartphone sales would slow by the end of the year and increase by only 1 percent by 2025. This contrasts with the excitement around AI-powered smartphones and other wearable devices.

Impact on global demand for chips

These concerns are compounded by new data from South Korea's chip sector, which showed a drop in production in September for the first time in 14 months. South Korea's semiconductor production fell 3 percent in September, following an 11 percent increase in the previous month, according to government statistics released Thursday. Growth in shipments also slowed to 0.7 percent from 17 percent in August. However, inventory levels continued to decline rapidly, falling 41.5 percent in September from a year earlier.

Analysis and implications

This suggests a gradual cooling of the industry as demand for memory chips reaches its peak. South Korean chip production is often seen as a barometer for global demand for chips because of the widespread use of these components in various electronics, including smartphones, servers and automobiles. The recent news from AMD, Samsung and South Korea's chip base could indicate a cooling bubble, especially given the hype surrounding the application of AI in various sectors.

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