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Demand for smartphones with artificial intelligence could help protect parts of the semiconductor industry from a “vicious” downturn if investment in data centers slows, the chief executive of the world's largest provider of chip testing machines said.
Doug Lefever, who runs Nvidia supplier Advantest, said he’s looking ahead to signs that major U.S. tech corporations are slowing to spend on AI. Meta, Google and Microsoft have invested heavily in data centers that may deliver enormous amounts of computing power.
A decline “may not last long after which it might begin to rise again, but due to concentration (of hyperscalers) available in the market without delay, any slowdown in data center buildouts can have a big effect on the availability chain,” Lefter said .
“I don’t wish to use the word bubble since it implies it should go away, but there will probably be cycles,” he said. “When the following cycle comes…” . . it might be quite malicious.”
In contrast, demand for AI smartphones has been “somewhat slow” but could increase quickly, Lefever said.
“Everyone is holding their breath and waiting for the killer app with the AI cell phones.” . . When that happens and other people start replacing their phones, it should be crazy,” he said.
Tokyo-based Advantest, a key supplier of test equipment for Nvidia's high-end graphics processors, is one in every of the businesses benefiting most from the soaring demand for semiconductors.
The company controls greater than half of the semiconductor testing market and demand for its services has skyrocketed as chips have turn into more advanced and costlier.
That dominance has pushed its stock price up greater than 80 percent over the past yr and about 500 percent over five years, with probably the most recent decline in December reflecting fears that latest President Donald Trump would take tougher motion against China.
While Japan has lost its leading position in chip production because the Nineteen Eighties, Advantest is an element of a gaggle of Japanese semiconductor equipment and materials corporations that hold dominant market positions in area of interest but essential parts of the availability chain.
Lefever said a finished advanced chip could now be tested between 10 and 20 times by Advantest machines, from cutting the wafer to assembling the finished product. Five years ago this value was in the one digits.
Testing times have also been increased, with Nvidia's latest Blackwell product taking three to 4 times longer to check than the previous generation. That gave Advantest confidence in October to boost its net income goal for fiscal 2024 by 16 percent to 122 billion yen ($792 million).
The trend of accelerating demand for Advantest machines – which may cost $1 million and have more parts than a industrial airliner – is unlikely to decelerate anytime soon. The company has focused on more sophisticated performance testing and has a market share of over 60 percent in some categories, analysts say.
The company is present in 18 countries, but still generates between 20 and 25 percent of sales in China, a figure that has fallen recently but with which Lefever is glad.
U.S. restrictions aimed toward limiting China's ability to supply advanced technology should not directly aimed toward this, partially since the sanctions are likely to goal the power to supply the chips itself.
Even if China were completely isolated, Lefever assumed that demand elsewhere could be strong enough to compensate. When a big company in China was recently hit by sanctions, the lost sales were quickly made up for by other customers, he said.
“We thought it is perhaps a yr, but it surely was months,” he said. “It was remarkable.”
