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Manufacturing has Beat Back the Shortage and is now Overflowing with Chips

Written by Stephen Vicinanza

It’s now a buyer’s market, as inventories of chips swell, as demand drops, due to several economic factors. The recent surge in demand for chips has produced a ground swell of stock and the economic climate has retailers of electronics with more stock than buyers. Fears of a recession as interest rates have gone up and perhaps the failing stock market, during 2022, have given rise to consumer reluctance to buy new electronics.

This is a great time to buy chips, and the industrial sector is quieting down its overwhelming demand for the computer component. From 2020 through 2021 as the pandemic kept everyone locked down, or working from home, demand for electronics skyrocketed.

Large companies like HP and IBM, couldn’t meet demand, putting stress on an already weak chip manufacturing system. China could not meet demands, Taiwan was ailing, and the United States was nowhere to be found. Semiconductor companies, like NXP, and Raspberry Pi, were pushing out delivery times to almost a year.

Now those same companies are seeing significantly reduced orders, to the extent that many chip companies are laying off large percentages of their workforce. Micron Technology has offered a glum outlook for 2023 and maybe a reduction in staff by as much as 10%.

It’s a glut in the chip market.

Much of the problem is due to the economy, there were more people buying electronics, especially PCs during the pandemic. Demand had surged until inflation hit hard, and people stopped buying. Two of the biggest retailers and manufacturers of computers for the consumer markets have said, during the pandemic their products flew off the shelves. Today they are spending more time on those shelves.

In the embedded and industrial markets, the outlook is grim. GPU prices bottom out in the market and the sale of CPUs, Microcontrollers, and Microprocessors is still on the decline. NVIDIA the largest American chip maker, by value, is saying, excess inventory could potentially disrupt the announcement of next-generation graphics chips.

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The excesses in the marketplace, on the consumer side, are driving the problems on the industrial side. As consumer electronics drive pricing, industrial chip manufacturers are seeing aggressive reductions in their pricing to try and push out overflowing stock.

The companies involved in consumer and industrial overstock are predicting this situation, which is driving the economy in technology, will persist for the better part of a year.

For more on this continuing story see the articles in the Wall Street Journal.

WSJ | wsj.com

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For the past 8 years, I have been writing about embedded technologies, added to my technical, academic, and medical editorial experience, with companies like Elsevier and Cambridge University Press. I tell people to read what I write, not try to pronounce my last name. I am always available for comments and suggestions you can reach me at product-editor@circuitcellar.com and I promise I will take the time to reach back out to you. I live in the North East with my wonderful family.

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Manufacturing has Beat Back the Shortage and is now Overflowing w…

by Stephen Vicinanza time to read: 2 min