Shenwan Hongyuan Group: How much longer can the chip "shortage" last?

Shenwan Hongyuan Group released a research report stating that currently, global semiconductor sales growth exceeds 100%, and South Korea's chip inventory-to-sales ratio is only around 0.5, both at historically extreme levels; in Q3, the capital expenditure growth rate of the semiconductor sector reached 89.8%, but still below the peaks during the communications internet, consumer electronics storage, and smartphone waves. The September chip shortage index was 102.56, at the highest level in the past 14 years, with supply and demand extremely tight. The chip shortage index leads South Korea and Taiwan, China consumer electronics CPI by more than half a year. This means that even if the chip shortage begins to ease, upward pressure on consumer electronics prices may persist until 2027. Shenwan Hongyuan Group's main views are as follows: What are the market and macroeconomic implications of the semiconductor industry? Cyclical indicators can track AI investment; chip shortages push up inflation Semiconductors/chips are a core component of AI investment, and the industrial chain exhibits highly global division of labor. About 3/4 of global AI industry chain capital expenditure flows to data centers, of which servers/GPUs account for more than half; calculations based on input-output tables show that Taiwan, China and South Korea together create 40.9% of global semiconductor value added, while China and the US absorb 48.7% of global semiconductor final demand. What are the market and macroeconomic implications of the semiconductor industry? 1) High-frequency data from the semiconductor industry can be used to track AI capital expenditure. For example, because stock prices reflect future orders and profits in advance, the Philadelphia Semiconductor Index is a high-frequency indicator of US AI investment; 2) Strong AI demand triggers a "computing power shortage," and continuous inventory depletion leads to inventory price increases, pushing up inflation pressure upstream and downstream. AI investment not only boosts global economic growth but will also drive accelerated expansion of US semiconductor capacity investment. In Q3, US semiconductor investment accounted for 0.4 percentage points of GDP. In 2026, US semiconductor investment has bottomed out and rebounded. According to SEMI forecasts, against the backdrop of AI buildout driving chip demand, US semiconductor investment intensity may accelerate in 2027 (different from AI investment). Where has semiconductor investment reached? Investment growth may still have upside, and the supply-demand imbalance is already quite extreme Where does the semiconductor industry sit in the AI chain, and how are its internal sub-industries divided? The semiconductor industry sits between energy and infrastructure (data centers), and in the AI industry chain its revenue share (31.9%) and market cap share (39.6%) are both the highest; the semiconductor industry can be divided into 7 sub-sectors, among which memory chips have the highest revenue and debt shares, and wafer manufacturing has the highest capital expenditure share. Where has global semiconductor investment reached? Supply-demand indicators are already quite extreme, and investment growth may still have upside. Currently, global semiconductor sales growth exceeds 100%, and South Korea's chip inventory-to-sales ratio is only around 0.5, both at historically extreme levels; in Q3, the capital expenditure growth rate of the semiconductor sector reached 89.8%, but still below the peaks during the communications internet, consumer electronics storage, and smartphone waves. Semiconductor investment is in full swing; what is the current pace of capacity expansion? The capital expenditure growth rate of the memory sector leads South Korean semiconductor capacity by about 14 months, and capacity improvement leads the inventory-to-sales ratio improvement; although US semiconductor investment has re-entered an expansion cycle in 2026, historical relationships show that US semiconductor investment leads industrial output by about 10 quarters, and the US semiconductor output index may face some resistance in 2027. Chip shortage index: a leading indicator of AI investment, exports, and inflation Shenwan Hongyuan Group constructed a "chip shortage index" to measure the tightness of global chip supply and demand, incorporating chip supply-demand factors (selected indicators) and South Korean semiconductor export prices (to determine weights) into a vector autoregression model. The index has a mean of 100, with values above 100 indicating tighter chip supply and demand; the September chip shortage index was 102.56, at the highest level in the past 14 years, with supply and demand extremely tight. On the basis of the chip shortage index, Shenwan Hongyuan Group designed a tracking system covering chip supply-demand and prices. This system can comprehensively identify the drivers of chip shortage/excess. On the demand side, indicators mainly selected include global semiconductor sales and Taiwan, China IT goods export orders. On the supply side, indicators mainly selected include South Korean semiconductor production and Taiwan, China electronics manufacturing PMI. What are the macroeconomic implications of the chip shortage index? The chip shortage index leads South Korea and Taiwan, China exports and investment by about one quarter, and also has guiding significance for US AI investment; the chip shortage index leads South Korea and Taiwan, China consumer electronics CPI by more than half a year. This means that even if the chip shortage begins to ease, upward pressure on consumer electronics prices may persist until 2027. Risk warnings The central price of oil rises more than expected; Warsh's policy stance is "hawkish"; the US economy slows more than expected.