After two years of shortages, semiconductor inventories are beginning to rise alarmingly. In a gloomy economic context, sales of smartphones, computers and electronic products in general are falling. However, certain specific sectors, such as the automotive industry, continue to have difficulty in obtaining chips.
Chip industry encounters widespread slowdown
Good news for consumers, less for manufacturers. Dell and HP, among the largest PC manufacturers, are increasing promotions and delivery times are being reduced significantly. This is a direct consequence of the fall in sales of computers, which remain on the arms of the two companies. The smartphone sector is undergoing the same situation.
The frenzy of buying electronics at the height of the Covid-19 pandemic, during the confinements, has subsided. Now it’s the turn of rising interest rates, inflation, fear of recession taking hold.
This is spilling over to the chip industry, where inventory is also piling up. Nvidia, for example, explained that it wanted to empty what it had on its shelves before restocking. Qualcomm also expects, since July, to see its inventories accumulate with the declines in sales of Samsung and Apple.
In October, the Semiconductor Industry Association revealed that, for the first time since 2020, semiconductor sales were down. the the wall street journal reports that Advanced Micro Devices (AMD) director Lisa Su said, ” I think the market will continue to be volatile “. During the fall, the company announced, alongside Samsung, revenue drops in the chip sector. AMD’s main competitor, Intel, is going through difficult quarters and is trying to reduce its payroll.
This is also the decision taken by the American memory chip manufacturer Micron, which recently anticipated a 10% drop in its number of employees in 2023. The company explains that it expects a glut crisis until September of this year. Its South Korean rival SK Hynix had also admitted a 60% drop in revenue from the third quarter. Only TSMC seems relatively spared, thanks to orders for its highly advanced products from Apple. UBS analysis finds chip stocks are already at a 10-year high.
Investments are maintained overall
Despite this situation, which may seem alarmist, most companies, Intel, Samsung, Micron… have confirmed or simply postponed the huge investments promised during the shortage, to build new semiconductor factories.
This is not only due to the subsidy programs adopted around the world. The current gloomy outlook does not fundamentally change predictions about the expansion of the chip market. Sales should still reach 1000 billion dollars by 2030. The industry has been accustomed, since the 80s, to the phenomenon of a cycle where a glut suddenly follows a situation of shortage.
However, the situation has some unique characteristics. The automotive industry still suffers from shortages of certain types of chips. This should last until the end of 2023, with the boom in electric cars, loaded with electronics. During the summer, Dan Hutcheson, managing director of the specialist firm VLSI Research, admitted his dismay in the pages of the FinancialTimes” I have never seen a time when we had excess inventory and shortages “.