AI Smartphones To Cushion Semiconductor Industry Amid Data Center Uncertainty: Report

Demand for artificial intelligence-enabled smartphones could serve as a buffer for parts of the semiconductor industry against a potential slowdown in data center investments, Financial Times cites Doug Lefever, CEO of Advantest, a Japanese supplier of chip testing equipment for Nvidia Corp NVDA.

Lefever expressed concern over possible dips in spending by major U.S. tech companies, such as Meta Platforms Inc META, Alphabet Inc GOOG GOOGL Google, and Microsoft Corp MSFT, which have been driving the construction of advanced data centers.

Lefever told the FT that while fluctuations in data center spending may not last long, any decline could significantly disrupt the semiconductor supply chain due to its reliance on hyperscalers.

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He added that the industry’s cyclical nature could lead to what he described as “vicious” downturns. However, he remained optimistic about the potential growth of AI smartphones, suggesting that a breakthrough application could rapidly drive consumer demand and spark a wave of handset replacements.

Advantest, headquartered in Tokyo, holds over 50% of the semiconductor testing market and has benefited from the rising complexity and cost of chips.

Lefever highlighted the growing complexity of chip testing, with Nvidia’s latest Blackwell products requiring three to four times longer to test than previous generations, as a key driver of sustained demand for Advantest’s solutions.

The company’s success extends to high-end testing equipment, which costs $1 million per unit and boasts a market share exceeding 60% in specific categories. Despite geopolitical challenges, such as U.S. restrictions on China, Lefever told the FT that increased demand elsewhere quickly offset lost sales in China. He emphasized that Advantest remains well-positioned globally, with operations in 18 countries and a diversified customer base.

Apple began introducing its Apple Intelligence features on October 28 with the launch of iOS 18.1, offering initial AI functionalities.

The rollout will continue with iOS 18.2, including ChatGPT integration and advanced tools like Visual Intelligence and Genmoji, aiming to boost future sales.

Needham analyst Laura Martin expects Apple iPhone to account for up to 96% of the company’s 2025 revenue.

International Data Corporation (IDC) had reignited confidence in smartphone manufacturers, including Apple, with a new market forecast projecting a 5.8% rise in global smartphone shipments to 1.23 billion units in 2024, recovering after two tough years.

The report highlighted increased demand for budget Android smartphones in China and emerging markets and strong adoption of generative AI smartphones in premium markets as key growth drivers.

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