record profits (STMicro, Samsung…), public and private investment plans… manufacturers in good shape

Due to the shortage of supply chains caused by the strong recovery of the global economy after the pandemic, the tension in the market for semiconductors, these main components for all products containing electronics, has increased many times over. This shortage is beneficial to suppliers who make significant profits. It also had a multiplier effect thanks to extensive investment plans from both manufacturers and governments, which now consider these chips as strategic products in the name of industrial sovereignty.

STMicroelectronics hopes to double its turnover

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

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

Europe will produce 20% of world capacity

STMicroelectronics and its American counterpart GlobalFoundries announced on July 11 that they intend to build a factory for the planned amount. “several billion euros” in Grenoble, resulting in approximately 1,000 additional jobs at the Croll site, where STMicroelectronics already has a manufacturing site.

Investments that will receive financial support from the French state will amount to 5.7 billion euros, pointed out the Élysée Palace during the “Choose France” summit.

According to the companies, this should allow to bring the European production capacity of electronic chips to 20% of the world’s capacity by 2030.

Asian giants will be hard to catch

This European mega-project, however, will have a lot to do with Asian competition, which will not slow down until the Europeans succeed in the global market.

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

And it is the semiconductor industry, with its record profits, that is the main culprit. Especially, “Benefits of activity underpants 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 seeking to secure its supplies at any cost.

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

The vast majority of the world’s most advanced microchips (80%) are made by just two companies, Samsung and TSMC, both of which are currently running at full capacity to fill a global shortage.

Relocation: Biden’s $52 billion plan passed by Congress

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

Because the resumption of production in the United States is one of the priorities of the President of the United States. At his request, Congress is to approve a $52 billion fund to invest in this local production, which today accounts for barely 10% of world production, just like in Europe.

For microprocessors, the bill finally provides $39 billion in aid to encourage companies to manufacture locally and $13 billion for research labs. Several manufacturers have already announced that these funds will build plants in Ohio or Indiana.

However, as Senator Bernie Sanders of the American Left reminded us, these sums will be allocated to companies. “profitable” which, according to him, “closed 780 factories in 20 years” in the USA. “We pay them a bribe to stay here”he joked in a press release.

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

– leading Chinese manufacturer semiconductors, minimal salaryannounced an investment 7 billion euros at the new factory in Shanghai.

– American Intel could invest 80 billion euros in the production of electronic chips in Europe over the next ten years, said its CEO Pat Gelsinger. On March 15, he specified that the first wave of investments would be about 33 billion euros. Beneficiaries of this historic windfall: Germany, Ireland, France, Italy, Spain and Poland for projects covering the entire microelectronics value chain.

– Not forgetting South Korea’s massive investment plan Samsungamount… 175 billion euros by 2023 to take on its semiconductor competitor, Taiwanese TSMS.

The deficit is narrowing, but this is not good news

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

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

Not forgetting that, faced with these announcements of new production units that will emerge from the ground, production with sometimes capricious cycles will have to keep pace: substrate manufacturer Isère Soitec has clearly understood this by recording this week as the best quarter of its history. but whose growth is, however, slowed down by the combination of two elements: first of all by the fire that broke out a few weeks ago on the high-voltage lines feeding his sector, and also by the start of his staff strike, which demanded a greater share in the profits.