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Demand for artificial intelligence-powered smartphones could help insulate parts of the semiconductor industry from a “deep” downturn if investment in data centers slows, says the chief executive of the world’s largest chip testing equipment provider. said the CEO.
Doug Lefever, who heads Nvidia supplier Advantest, said he is watching closely for signs that spending on AI by major U.S. technology groups is slowing. Meta, Google, and Microsoft have invested heavily in data centers that can provide large amounts of computing power.
The decline “may not last long and bounce back quickly, but there is so much concentration in the market right now (hyperscalers) that any delay in data center construction will have a significant impact on the supply chain.” ” Lefever said.
“I don’t like to use the word bubble because it implies that the bubble will disappear, but there will be cycles,” he said. “When the next cycle comes… it could be pretty vicious.”
In contrast, demand for AI smartphones is “slightly slower,” but could grow quickly, Lefever said.
“Everyone is holding their breath waiting for a killer app with an AI handset. . . . If that happens and people start replacing their phones, it’s going to be crazy,” he said.
Tokyo-based Advantest is a major supplier of test equipment for NVIDIA’s high-end graphics processing units and is one of the companies most likely to benefit from rapidly growing demand for semiconductors.
The company controls more than half of the semiconductor testing market, and demand for its services is rapidly increasing as chips become more sophisticated and expensive.
This advantage has helped the stock rise more than 80% in the past year and nearly 500% in five years, but the recent decline in December may indicate that President-elect Donald Trump will take a tougher stance on China. This is said to be due to concerns that the
Although Japan has lost its leading position in chip production since the 1980s, Advantest is part of a group of Japanese semiconductor equipment and materials companies that hold dominant market positions in a niche and essential part of the supply chain. .
Lefever said a completed advanced chip may now be tested 10 to 20 times by Advantest machines, from cutting the wafer to assembling the final product. Five years ago, that number was in the single digits.
Testing times have also increased, with Nvidia’s latest Blackwell products taking three to four times longer to test than the previous generation. That gave Advantest confidence in October to raise its fiscal 2024 net profit target by 16% to 122 billion yen ($792 million).
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The growing demand for Advantest’s machines, which can cost $1 million and contain more parts than a commercial aircraft, doesn’t seem to be slowing down anytime soon. Analysts say the company focuses on high-end performance testing, with market share of more than 60 percent in some categories.
Although the company has a presence in 18 countries, it still derives 20% to 25% of its revenue from China, a level that has fallen recently, but Lefebvor said he is satisfied.
Sanctions tend to target the ability to manufacture the chips themselves, and are not directly subject to U.S. regulations that curb China’s ability to produce advanced technology.
Even if China were completely isolated, Lefebvre predicted that demand elsewhere would be healthy enough to compensate. When a large company in China was recently hit with sanctions, the lost revenue was quickly made up by other customers, he said.
“I thought it might take a year, but it took months,” he said. “That was amazing.”
