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OAKLAND, Calif., July 12 (Reuters) – A supply chain crisis triggered by a global pandemic has deprived manufacturers of PCs and smartphones in cars of the computer chips needed to make their products .
All of a sudden that changed over the course of three weeks from late May to June, due to high inflation, China’s latest COVID lockdown, and the war in Ukraine slowing down spending on consumers, especially PCs and smartphones.
Chip shortages have become a glut in some sectors, taking Wall Street by surprise. In late June, memory chip firm Micron Technology Inc (MU.O) said it could reduce production. The market change has taken Micron unawares, Chief Business Officer Sumit Sadana admitted. read more
As the U.S. chip earnings reporting period begins later this month, TechInsights chip economist Dan Hutcheson has warned of a lot of bad news after Micron’s bad forecast. “The micron kind of plows the soil, with their fidelity,” he said.
Concerns about an industry downturn have hurt chip stocks, with the Philadelphia Semiconductor index (.SOX) falling 35% so far in 2022, more than the loss of the S&P 500 (.SPX) 19%.
Hoarding exacerbates this.
Like nervous shoppers storming supermarket aisles for bathroom paper before a COVID-19 lock, manufacturers stocked up on computer chips during the pandemic.
Prior to that, “at the right time” production was the norm for conservative fiscal firms, ordering parts as close to production time as possible to avoid excess inventory, reduce capacity. in the warehouse and cut spending first.
During the pandemic that moved into what some ridiculed as a “just in case” practice of storing chips.
“Hiding is a sign they think is important until one day they look at it and say,‘ Why do I have all this inventory? ’” Says Hutcheson, who predicts the chip’s supply and demand. more than 40 years. “It’s like toilet paper.”
The large-chip U-turn has been hit by inequality in business sectors, experts said.
Large suppliers of chips to consumer electronics makers, especially low-end smartphones, are the hardest hit by the downturn, said Tristan Gerra, Baird’s senior analyst for semiconductors.
Nvidia Corp (NVDA.O), the design giant whose graphics chips are used for gaming and mining cryptocurrency, will see “another shoe drop” as prices continue to fall, exacerbated by the recent cryptocurrency market crash, Gerra said.
Among those less affected by a glut are suppliers to Apple Inc. such as the world’s top chip factory Taiwan Semiconductor Manufacturing Co. (2330.TW), said Wedbush analyst Matt Bryson. Demand for Apple devices remains high, which is much higher in the market.
Chipmakers that supply automotive and data centers will also grow, according to Gerra, with relentless demand.
“In power management, we’re going gangbusters,” said an executive at another global chipmaker who asked not to be identified.
However, for radio frequency chips used in smartphones, “we’re seeing a pullback due to handsets,” he added.
The executive chip factory is “redesigning” production lines to produce more power management chips for cars and fewer RF chips, which will ultimately help alleviate some of the auto’s shortcomings. chip, he said.
While industry executives and analysts can’t say how many surplus chips are in warehouses around the world, the first quarter inventory hit a record high among major electronics manufacturing service companies, as Jefferies analyst Mark Lipacis in a note on July 1. The first record in the first quarter was more than two decades ago, before the dotcom bubble burst.
Manufacturers may decide to use chips in warehouses instead of buying new ones, and cancel orders, Lipacis warns.
Auto chipmakers are safe right now, some analysts said. But that won’t last long.
In her September note Bernstein analyst Stacy Rasgon said automakers were ordering more chips than they needed, and that trend was continuing, she told Reuters.
That would create a problem if carmakers stop buying chips to use their stockpiles.
Reporting by Jane Lanhee Lee, further reporting by Noel Randewich of Oakland, Calif., Chavi Mehta of Bangalore, and Joyce Lee of Seoul; Edited by Kenneth Li and Richard Chang
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