Forget the chip shortage, it's all over

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We went from an extreme shortage of chips, to a surplus of stocks.

Forget the shortage of chips, it's all over

The shortage of chips and electronic components is definitely over. Due to the pandemic, manufacturers of smartphones, PCs and other products using electronic components had difficulty finding these components. And we even had shortages for certain products. But today, the situation has reversed. The macroeconomic context makes people pay more attention to their spending. Result: Sales of PCs and smartphones plummet.

In addition, the demand for microchips has also collapsed. And companies that struggled to source chips in 2021 must now manage excess inventory. Chip suppliers such as Intel, AMD, and Nvidia are seeing demand from PC manufacturers drop. And according to AMD CEO Lisa Su, these PC makers are currently using their stockpiles of chips, and not replenishing inventory to the same levels.

On the smartphone side, it's not better. Qualcomm, which is one of the main providers of mobile processors, has revised its projections. It now predicts that this last quarter, smartphone shipments will decline with a double-digit rate of decline. “Rapidly deteriorating demand and easing supply constraints in the semiconductor industry have led to increased channel inventories,” he also said in April. November.

We now have a surplus of chips

According to the Wall Street Journal, citing an analysis by Susquehanna International Group LLP, the lead time between ordering a chip and delivering it has decreased. And the levels of inventories in companies (measured in days) would have reached values ​​never seen in a decade. All this shows that the demand for microchips is currently very weak.

And some companies, which were overwhelmed with orders during the shortage, must now tighten their belts. This is the case of Micron, which recently announced a 10% reduction in its workforce. As for Intel, in October it announced a plan to cut spending by $3 billion in 2023, and wants to save a total of $10 billion by 2025. And while the company won't give details, it however, clarified that this cost reduction will include a reduction in staff.

The good news is that some companies think the situation could improve in 2023. And on the other hand, chipmakers still anticipate a long-term increase in demand. This is why the industry is planning to increase its production capacity, despite the current context. In the United States, chipmakers can also count on government aid.

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