Chipmakers need to start serving their robot overlords

Register now

(Bloomberg Gadfly) -- It's starting to look like smartphones are no longer the ever-reliable driver of global semiconductor demand.

For the past decade, it was those touch-screen, internet-connected, selfie-taking devices that propped up the industry as the appetite for computers declined.

STMicroelectronics NV on Thursday added to the chatter when it pointed to "unfavorable seasonal dynamics for smartphone applications" in forecasting a dip in revenue and profitability. To be clear, smartphone seasonality is expected in the industry and analysts at Natixis SA were quick to respond to the Swiss firm's fourth-quarter results and first-quarter outlook in a positive tone.

But put together, a comment here and a hint there, the larger picture is starting to become clear. Texas Instruments Inc. this week gave a disappointing sales outlook, blaming makers of communications equipment and some personal electronics.

Taiwan Semiconductor Manufacturing Co. enunciated the changing trend most clearly last week when it forecast flat revenue growth for smartphones, but strength in newer areas such as high-performance computing (HPC), the internet-of-things (IoT) and automotive. HPC is a catch-all term that includes Bitcoin mining and graphics processors, yet TSMC Chairman Morris Chang last week highlighted artificial intelligence specifically, saying

HPC will grow strongly due to continuing expansion of AI applications in all electronic devices.

Cars and appliances are being automated thanks to the advent of AI software and chips. In China, a growing power in this field, the government has singled out specific companies for special treatment because of their development of AI semiconductors. Such technology underpins the move by firms like Hangzhou Hikvision Digital Technology Co. beyond simple surveillance cameras and into real-time facial recognition and tracking.

For chipmakers -- from Texas to Geneva -- it's obvious the smartphone gravy train is starting to slow. Now they just need to figure out how to satisfy those robot overlords.

For reprint and licensing requests for this article, click here.