After the shortage of chips in the past two years, saturation. Here’s chip stocks exploding amid falling electronics sales. As a result, semiconductor companies are revising their production forecasts.
After two years of strong demand (with its share of fake components), the production of chips and semiconductors becomes surplus. The reason ? Declining consumer electronics amid rising interest rates and 2023 recession fears. Chip inventory levels are “well above our target,” said Sanjay Mehrotra, chief executive of Micron Technology , when releasing the company’s quarterly results yesterday Thursday, according to the WSJ. And inventory levels are at their highest level in more than a decade according to analysis by UBS.
The consequences of this new situation are manifold.
- On the consumer side, the price of electronics, which now range from washing machines to laptops and smartphones, could drop to boost sales. HP and Dell Technologies, two of the biggest PC makers, say their products are now selling more slowly than in recent months.
AMD director Lisa Su wants to remedy the situation by delivering fewer chips than there is demand. “I think the market will continue to be volatile,” she said. Qualcomm, which supplies chips for Samsung and Apple smartphones, has repeatedly cut its sales forecast this year. - And for chipmakers, there’s been a wave of job cuts and a reduction in capital spending to restore profitability levels that have eroded in recent months. Micron Technology has announced that it wants to cut around 10% of its workforce. Intel in October also mentioned job cuts.
- Finally, the delays between orders and deliveries of chips, which had increased since the start of the pandemic, have decreased in recent months.
Strong long-term demand growth
Chipmakers’ executives, however, expect the situation to gradually improve next year, despite uncertainty from the industry’s brutal boom and bust cycles. Micron expects the situation to persist until September 2023.
Above all, over the long term, business leaders in this sector are preparing for a long-term increase in demand. This encourages them to build more factories, like Intel. Chip sales are expected to double by 2030, surpassing $1 trillion in revenue globally.