record profits (STMicro, Samsung…), public and private investment plans… manufacturers in a fertile state

Due to shortages in supply chains caused by the strong recovery of the global economy after COVID, tensions have increased in the market for semiconductors, those essential components for all products that contain electronics. This shortage has benefited suppliers who are making significant profits. It also had a multiplier effect thanks to large investment plans from both manufacturers and states, which in the name of industrial sovereignty now consider these chips to be strategic products.

STMicroelectronics hopes to double its turnover

Thus, Franco-Italian semiconductor manufacturer STMicroelecteonics posted a net profit of $1.6 billion for the first half of the year on Thursday, an amount that more than doubled in one year (+100%), in particular thanks to a significant improvement in its profitability. In the first six months of the year, sales totaled $7.4 billion, an increase of +23%. Operating margin achieved +26% in the second quarter against 16% a year earlier.

The group hopes to continue this momentum to achieve annual turnover “between $15.9 billion and $16.2 billion, with a gross margin of approximately 47%”– said Jean-Marc Chery, its managing director.

Europe will produce 20% of the world’s capacity

On July 11, STMicroelectronics and its American counterpart GlobalFoundries announced their intention to build a factory for the planned amount “several billion euros” in Grenoble, leading to the creation of approximately 1,000 additional jobs at the Crolles plant, where STMicroelectronics already has a manufacturing site.

Investments that will receive financial support from the French state will amount to 5.7 billion euros, Elisey clarified during the “Choose France” summit.

According to the companies, this should make it possible to bring European production capacity of electronic chips to 20% of global capacity by 2030.

The Asian giants will be hard to catch

This European megaproject, however, will have a lot to do with Asian competition, which will not diminish until the Europeans manage to break out in the world market.

Because the growth of semiconductors also applies South Korean giant Samsung Electronics which on Thursday reported a 12.2% year-over-year increase in operating profit in the second quarter of 2022.

And the main culprit is the semiconductor industry with its record profits. Especially, “advantages of activity shorts improved (…) as the company focused on meeting the high demand for servers“, Samsung said.

These memory chips have been at the center of global geopolitical tensions in recent months, with every nation scrambling to secure their supply at any cost.

In June, Samsung Electronics became the first manufacturer in the world to mass-produce advanced 3-nanometer chips, aiming to match and eventually surpass Taiwan’s TSMC in the race to produce the most advanced components. The new chips will be smaller, more powerful and more efficient, and will be used in high-performance computing applications and then integrated into consumer devices such as mobile phones.

The vast majority of the world’s most advanced microchips (80%) are produced by just two companies, Samsung and TSMC, both of which are now working at full capacity to meet the global shortage.

Relocation: Congress passes Biden’s $52 billion plan

In May, US President Joe Biden himself visited South Korea to visit Samsung’s giant semiconductor factory in Pyeongtaek, near Seoul.

Because the restoration of production on the territory of the United States is one of the priorities of the President of the United States. At his request, Congress must approve a $52 billion fund to invest in this domestic production, which today accounts for only 10% of world production, the same as Europe.

As for microprocessors, the bill ultimately provides $39 billion in aid to encourage companies to manufacture locally and $13 billion for research labs. Several manufacturers have already said they will use the funds to build factories in Ohio or Indiana.

However, as Senator Bernie Sanders, a figure on the American left, reminded us, these amounts will be allocated to companies. “profitable” which, according to him, “closed 780 factories in 20 years” in the USA. “We bribe them to stay here”he quipped in a press release.

Everywhere, all over the world, projects are multiplying, as evidenced by current investments:

– the leading manufacturer in China semiconductors, minimum wageannounced the investment 7 billion euros at the new factory in Shanghai.

– American Intel could invest 80 billion euros in electronic chip manufacturing in Europe over the next ten years, said its CEO Pat Gelsinger. On March 15, he clarified that the first wave of investments will amount to little 33 billion euros. Beneficiaries of this historic excess profit: Germany, Ireland, France, Italy, Spain and Poland for projects covering the entire microelectronics value chain.

– Not forgetting the large-scale investment plan of South Korea Samsungnumber… 175 billion euros by 2023 will face its rival in the semiconductor industry Taiwanese TSMC.

The deficit is shrinking, but it’s not good news

However, the war in Ukraine and fears of a global recession have reduced the need for semiconductors.

Global demand for chips “enters a period of weakness that will last until 2023”, said Richard Gordon, an analyst at research firm Gartner, in a report cited by Bloomberg.

Not forgetting that with the announcement of new production units coming on site, production with sometimes capricious cycles must keep pace: lining maker Isère Soitec saw this clearly, recording the best quarter in its history this week, but whose growth, however, is being slowed by a combination of two elements: first of all, a fire that occurred a few weeks ago on the high-voltage lines feeding its sector, and the birth of a strike by its staff, who demanded a greater share of profits.