Intel and the $1.5trn chip industry meltdown

In licking county, Ohio, fleets of dump trucks and bulldozers are shifting earth on the future site of chip factories. Intel is building two fabs there at a cost of around $20bn. In March President Joe Biden called this expanse of dirt a field of dreams in his state-of-the-union speech. It was the ground on which Americas future will be built, he intoned.

In the spring it was easy to be dreamy about Americas chip industry. The pandemic-induced semiconductor crunch had proved just how crucial chips were to modern life. Demand was still rising for all sorts of chip-powered technology, which these days is most of it. Investors were less gloomy on chips than on other tech, which was taking a stockmarket beating. The CHIPS act was making its way through Congress, promising to plough subsidies worth $52bn into the domestic industry, in order to reduce Americas reliance on foreign fabs and support projects like Intels Ohio factory.

Half a year later the dreams look nightmarish. Demand for silicon appears to be falling as quickly as it had risen during the pandemic. In late September Micron, an Idaho-based maker of memory chips, reported a 20% year-on-year fall in quarterly sales. A week later AMD, a Californian chip designer, slashed its sales estimate for the third quarter by 16%. Within days Bloomberg reported that Intel plans to lay off thousands of staff, following a string of poor results that are likely to continue when it presents its latest quarterly report on October 27th. Since July a basket of Americas 30 or so biggest chip firms have cut revenue forecasts for the third quarter from $99bn to $88bn. So far this year more than $1.5trn has been wiped from the combined market value of American-listed semiconductor companies (see chart).