On a recent quarterly earnings call, the chief executive of Semiconductor Manufacturing International Corporation, China’s leading chipmaker, predicted a “global supply glut” in the types of semiconductors his company produces. Simultaneously, he announced a $7.5bn increase in capital expenditure. It may defy business logic but, helped by generous subsidies, China’s chipmakers are ramping up production capacity despite concerns about oversupply. According to one consultancy, the country’s chip production capacity will grow by 60% in the next three years and could double over the next five. Since Western restrictions on the exports of chipmaking equipment to China mean that it can’t produce the most advanced processor chips, much of this production will be of foundational processor chips, which are widely used in cars, household goods, and consumer devices.
- Date Posted:
- January 29, 2024
Investment by manufacturers in plants and other production facilities surged almost 63% in 2023, the largest annual advance since 1951, according to the government’s latest report on gross domestic product. The increase has its roots in companies taking advantage of federal incentives and making up for deferred spending during the pandemic when supply chains were in disarray. Purchasing and supply executives expect outlays to increase almost 12% this year after rising by nearly 15% in 2023, according to the Institute for Supply Management’s latest semiannual economic forecast. While factories are dialing back the pace of investment, S&P Global Market Intelligence sees spending in the sector still climbing $54 billion after an estimated $50.6 billion last year.