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Oakland, CA — A supply chain crisis caused by a global epidemic that robbed PC and smartphone makers of the computer chips they needed to make their products.
High inflation, China’s latest COVID blockade, and the war in Ukraine have curtailed personal consumption of PCs and smartphones in particular, and everything has changed abruptly in the three weeks from late May to June.
Chip shortages in some sectors have surprised Wall Street. By late June, memory chip company Micron Technology Inc. said it would cut production. CEO Sumit Sadana admitted that the market reversal was a surprise to Micron.
As the US chip earnings reporting season begins later this month, TechInsights chip economist Dan Hutcheson warned of even worse news following Micron’s harsh forecasts. “Micron cultivated a kind of ground with their honesty,” he said.
Concerns over the industry downturn have blamed chip stocks, and the Philadelphia Semiconductor Index has fallen 35% so far in 2022, well above the 19% loss of the S & P 500.
Hoarding is exacerbating it.
Manufacturers stockpiled computer chips during the pandemic, just as nervous shoppers raid supermarket aisles for toilet paper prior to the blockade of COVID-19. Prior to that, “just-in-time” manufacturing was the standard for financially conservative companies, as close to production time as possible to avoid overstocking, reduce warehouse capacity, and reduce upfront investment. I was ordering parts.
During the pandemic, some jokingly moved to what they call the practice of stockpiling chips “just in case.”
“Hoarding is a sign they think it’s essential until one day they see it and say,’Why do I have all this inventories?'”, Chips for over 40 years. Hatchson, who has predicted the supply and demand of the market, said. “It’s like toilet paper.” According to experts, big-chip U-turns are hitting unevenly across the business sector.
Tristan Gera, senior analyst for semiconductors at Baird, said consumer electronics makers, especially major suppliers of chips for low-end smartphones, will be most affected by the recession. Nvidia Corp, a design giant whose graphics chips are used in gaming and mining cryptocurrencies, could see “another shoe drop” as prices continue to fall, exacerbated by the recent plunge in the cryptocurrency market. There is, says Terra.
According to Wedbush analyst Matt Bryson, Apple’s suppliers, such as Taiwan Semiconductor Manufacturing, the world’s top chip factory, have the least overwhelming impact. Demand for higher-end Apple devices remains high. Chip makers that supply cars and data centers will also prosper, Gera said, saying demand will not decline. In power management, we’re in a fuss, “said another global chipmaker executive who asked not to be identified.
But for the radio frequency chips used in smartphones, he added, “the handset is causing a setback.”
Executive chip factories are “modifying” production lines to increase power management chips for cars and reduce RF chips, which could ultimately help fill the car chip shortage. He said.
Jeffreys analyst Mark Lipasis said in a July 1 note that industry executives and analysts don’t know how many extra chips are in warehouses around the world, but first-quarter inventories are key. He said he set a new record high for an electronic equipment manufacturing service company. The previous first quarter record was more than 20 years ago, just before the dot-com bubble burst.
The manufacturer may decide to cancel the order by running out of chips in the warehouse instead of buying new chips, Lipasis warned.
According to some analysts, car chip makers are safe for now. But that may not last long.
Bernstein analyst Stacy Lasgon told Reuters in a September note that automakers have ordered far more chips than they think they need, and that trend continues.
This causes problems when car makers stop buying chips to run out of stockpiles.
Jane Lanch Lee
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