Weekly: Why are chips down?
10 min read.
Highlights
Why are chips down? The central question in the chip space in this quarter so far is the market slump despite strong financials, upbeat forecasts, and increased capex. Two pieces in the FT. One considers that the chip industry, especially memory chips, are highly cyclical. It also suggests that if the benefits of AI does not manifest in hyperscaler earnings soon, then the AI fervour can sour quickly, affecting chipmaker prospects.
Another piece, in FT Alphaville, notes that although memory chip stocks are sliding quickly, memory chip prices themselves continue to climb amid AI-induced demand. I remember that the question of the AI bubble was all the rage around this time last year. Is the said bubble now popping?
On SK Hynix, Intel. The Economist profiles SK Hynix and its recent history, exploring how it got so big. Some reasons continue: mistakes by chief rival Samsung, a collaborative corporate culture (vs competitive and rigid Samsung), an openness to experiment, and a big bet on HBMs in 2013.
Elsewhere the WSJ does a profile on the US government’s hands-on approach to Intel, which included a story that Trump/Lutnick successfully pressured Apple CEO Tim Cook to purchase Intel chips. Intel needs to deliver technologically. Many eggs have been placed on the Intel basket.
FT film on chip smuggling. The FT published a 20 min short film on how American AI chips are bypassing export controls and making it to China where they reach a thriving black market. US policymakers should take note.
Thanks for reading.
Table of Contents
Simon Edelstein, “Why the chips are down despite the AI boom,” FT, 07/11/2026.
Adam Shaw, “When the ducks are quacking, feed them,” FT, 07/13/2026.
The Economist, “How SK Hynix became the king of advanced memory chips,” The Economist, 07/16/2026.
FT, “Silicon shadows: inside the black market for AI chips | FT Film,” FT, 07/14/2026.
Robbie Wheelan, “The White House Made Fixing Intel Its Pet Project. It’s Working.,” WSJ, 07/10/2026.
The Economist, “Allies learn how to bully America,” The Economist, 06/30/2026.
Robyn Klingler-Vidra, “Vietnam’s Economic Statecraft in the Global Chip Race,” The Diplomat, 07/10/2026.
1.
Simon Edelstein, “Why the chips are down despite the AI boom,” FT, 07/11/2026.
Over the past couple of weeks, the world’s largest memory chipmakers have produced knockout financial results yet seen their shares fall sharply. What’s going on?
The semiconductor industry is known to be highly cyclical. Booms have been followed by busts. The head of Micron, Sanjay Mehrotra, tried to argue that this cycle has ended due to the AI boom in demand for faster memory chips. So far, the market thinks otherwise.
If the end buyers of all these chips — AI hyperscalers — fail to increase revenues enough to afford all this kit, the boom could turn to bust. Having strong revenue growth in AI is to be expected: the difference will be between “strong” and “enough to pay the bills” — and the bills are huge.
Right now the market wants to see more meat on the AI story before further funding is instantly given.
2.
Adam Shaw, “When the ducks are quacking, feed them,” FT, 07/13/2026.
There’s an old saying on Wall Street that when the ducks are quacking you feed them. And right now investors are quacking for memory, and finance types are understandably keen on slaking their appetite. Reports that a little-known 12-year-old memory “start-up” is readying an IPO is a good example of the phenomenon.
Of course, the memory mania could be coming to an end. The big memory makers — primarily Micron, Samsung and SK Hynix — have all fallen sharply from their June peaks on fears that the party might be over.
On the other hand, prices for memory chips at DRAMeXchange are still creeping up, and the DRAM ETF took in another $1.9bn last week, lifting its one-month inflows to nearly $9bn. It doesn’t seem like the memory excitement has faded.
3.
The Economist, “How SK Hynix became the king of advanced memory chips,” The Economist, 07/16/2026.
How has SK Hynix done it? Part of the explanation lies in its nimbleness. Stuck in the shadow of Samsung, which controlled around 40% of the memory market (against Hynix’s roughly 25%) in the early 2010s, the runner-up started looking for ways to leapfrog the competition. Identifying novel ways to circumvent the physical limits of increasingly tiny chips became a focus, recalls Park Sung-wook, its chief executive in 2013-18. Opportunity struck in 2008 when AMD, an American company that itself played second fiddle to Intel, asked SK Hynix to create a new form of stacked memory chip for a graphics processor. The pair had previously worked together on an earlier graphics-memory chip that had proved a great success. Although the early trial of HBM, launched in 2013, proved too pricey for customers, it demonstrated that stacking memory chips vertically could achieve significantly faster speeds.
Missteps from rivals provided an added boost. In 2019 Samsung downsized its HBM team to invest in other types of chips. Engineers who still believed in the technology fled to SK Hynix. A crop of engineers from Intel, which was struggling with product delays, joined the South Korean memory-maker too.
Corporate culture has also played an important part. Samsung is known to reward internal competition through a cut-throat meritocracy. SK Hynix, on the other hand, embraces collaboration. Hyun Sun-yeop, its former human-resources chief, argues that company-wide practices such as frequent one-on-ones let employees speak out and share information, in contrast with Samsung’s more hierarchical and siloed environment.
Engineers are also encouraged to tinker, with unsuccessful projects turned into “failure case studies”. That has led to innovations such as “mass reflow-molded underfill”, which packages together stacked chips by filling gaps between them with a moulding liquid, helping to dissipate heat. Such techniques helped SK Hynix beat Samsung to market with HBM3, the fourth generation of the product, in 2022, making it the sole supplier of cutting-edge memory to Nvidia, the king of AI chips.
SK Hynix could still falter. It has never faced such a position, as a market leader during a period of relentless expansion. Samsung and Micron are catching up; both are set to supply some HBM for Nvidia’s upcoming Vera Rubin server rack, and Samsung has been regaining its lead in conventional memory. The three businesses, which together dominate the memory market, have all unveiled dizzying investment plans. Last month the two South Korean giants announced over $2trn of investment up to 2040, including in a “mega-cluster” of chip facilities in Yongin, a city near Seoul.
4.
FT, “Silicon shadows: inside the black market for AI chips | FT Film,” FT, 07/14/2026.
As the US tightens export controls, a thriving black market is helping advanced AI semiconductors reach China. The FT’s Eleanor Olcott investigates how resellers are bypassing US export controls and what the illicit trade reveals about the geopolitical race over artificial intelligence.
5.
Robbie Wheelan, “The White House Made Fixing Intel Its Pet Project. It’s Working.,” WSJ, 07/10/2026.
Trump and Lutnick urged Cook to use Intel’s manufacturing plants, or fabs, to make some of Apple’s chips, according to government officials.
In one of the most remarkable examples of state capitalism in recent memory, the U.S. government became the chipmaker’s largest shareholder later that month when it converted $9 billion in federal grants into a 10% stake in the company.
Nearly a year later, Trump announced via Truth Social post that Apple would begin using Intel-made chips for some of its products, sending Intel shares to record trading highs. “I decided to help Intel because we need to design and build our Chips right here in America,” Trump wrote.
Apple plans to have Intel make chips for both Mac laptops and iPhones, according to a person familiar with the negotiations. The connection between the tariff talks and a potential deal between Apple and Intel has not been previously reported.
The company’s stunning resurgence is partly good luck: the AI boom recently entered a new phase that demands huge quantities of the computer chips known as CPUs, Intel’s specialty. But the Trump administration’s financial and strategic patronage has been the more crucial factor.
The administration has taken a hands-on approach to the company, twisting the arms of major potential customers and partners including Apple, Nvidia and Elon Musk’s SpaceX, all of which have signed deals with Intel since the government stake was announced.
Tan has been visiting Washington about once a month to meet with officials from the Commerce Department, Intel and U.S. government officials said. Tan also talks on the phone regularly with Lutnick, updating him on customer relationships and business conditions.
6.
The Economist, “Allies learn how to bully America,” The Economist, 06/30/2026.
Around the world, friends and adversaries of America are reaching the same, bleak conclusion. To earn President Donald Trump’s respect, show that you can hurt him. None of America’s security partners is foolish enough to threaten Mr Trump openly. But all of them watched Iran gain leverage over a stronger adversary by closing the Strait of Hormuz, and some were taking notes. Iran’s abuse of this choke point is simply appalling, such allies tut-tut. How do we get one of our own?
Taiwan knows that it needs leverage. After it embraced democracy 30-odd years ago, Taiwan won friends in Washington by talking up its status as a bastion of liberty, menaced by autocratic China. When despot-praising Mr Trump took office, Taiwanese officials quickly learned to downplay talk of shared values. They watched in horror when Mr Trump scorned Ukraine as a small country that had foolishly sought to defend itself against larger Russia. That could be us, Taiwanese shuddered.
Instead, Taiwan leans on two arguments about its strategic value to America. One involves Taiwan’s location in the “first island chain”, Pentagon jargon for the archipelago that hems in mainland China, running from Japan through Taiwan to the Philippines. The other involves Taiwan’s indispensable role as a global centre for making chips, including around 90% of the most advanced semiconductors. For some years Taiwanese politicians have called their chip industry a “Silicon Shield” or—in their more flowery moods—a sacred mountain that makes Taiwan too valuable for China to attack, or for America to abandon.
Other countries take a dimmer view of Taiwan’s chipmaking dominance. Even friendly governments resent their dependence on an earthquake-prone, typhoon-lashed island that imports almost all its raw materials and energy. Even before Mr Trump, Taiwan was being pressed to build chipmaking foundries overseas, notably in America, Japan and Germany. Mr Trump goes further, falsely charging Taiwan with stealing America’s chip industry decades ago. He has browbeaten TSMC and other leading firms to expand operations in Arizona, Texas and other states.
In Taipei, the capital, some policy types fret about the silicon shield being weakened over time, and about talented engineers being deployed to build and run foreign fabs. Others, though, suggest ways to turn Taiwan’s defensive shield into a weapon, right now. Taiwan has its own strait. The channel between the island and the mainland, spanning about 160km, carries some of the world’s most precious cargoes each day, including silicon chips.
7.
Robyn Klingler-Vidra, “Vietnam’s Economic Statecraft in the Global Chip Race,” The Diplomat, 07/10/2026.
Now, fresh off its World Bank reclassification as an upper-middle-income country, Hanoi has a far more ambitious objective: to become an indispensable player in the physical layers underpinning artificial intelligence (AI).
Semiconductors sit at the center of that ambition. Over the past two years, Vietnam has unveiled a series of initiatives that together amount to one of Southeast Asia’s most ambitious semiconductor strategies. The government plans to train 50,000 semiconductor engineers by 2030, launch a $100 million venture capital fund inspired by Israel’s Yozma program, dramatically increase public spending on science and technology, attract additional foreign investment from global technology leaders, and secure domestic supplies of rare earth minerals that are critical inputs into chip manufacturing.
Taken together, these initiatives represent something more significant than Vietnam’s past approach to industrial policy. Hanoi is using economic statecraft to position itself within global value chains as a means of fueling continued economic growth and sovereignty.
The ambition is evident, but whether these policies deliver will depend on whether they genuinely build technological capabilities. Historically, the financially strapped state invested too little in science and technology and a “two-speed” economy persisted, where foreign firms operating in Vietnam did not effectively translate into upskilling Vietnam’s firms and workforce. Can this push be different?
Vietnam enters this new phase with significant momentum. It was one of the world’s fastest-growing economies in 2025, extending more than 30 years of sustained economic growth since the doi moi reforms.
The central challenge for Vietnam is now one of ensuring absorptive capacity: that foreign investment generates domestic technological learning; that engineering graduates develop world-class capabilities rather than simply increasing headcount; that government venture capital investment expands its internationally connected investors rather than serves as a state financing vehicle that may crowd out market-based capital.
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