A handful of chipmakers including Micron and AMD are signalling an easing of the two-year global shortage of semiconductor chips as rising inflation and cooling economies squeeze consumer and corporate spending.
Micron Technology Inc, a maker of memory chips, forecast on Thursday much worse-than-expected revenue for the current quarter and said that the market had weakened considerably in a very short period of time. Chip stocks fell Friday, including those of Taiwan's TSMC and MediaTek, Dutch chip-gear maker ASML, Franco-Italian firm STMicroelectronics and Germany's Infineon.
The surge in demand from people who work from home saw a surge in demand for chipsmakers as they tried to meet big orders from makers of phones and personal computers PCs. The chip shortage caused companies, including automakers, to slash production, delay shipments and pay steep premiums for key chips.
The recent COVID 19 lockdowns in China have had global executives warnings about supply chokepoints until recently.
Advanced Micro Devices Inc reported a slowdown in PC sales last month after two years of strong demand.
Micron said that China's recent lockdowns have resulted in a 30 per cent drop in China's revenue in the current quarter.
Gartner said that industrywide shipments of smartphones to China - the world's biggest smartphone market, are expected to shrink by 18 per cent this year. It expects worldwide shipments to drop 7 per cent due to supply chain snarls and the Russia-Ukraine war.
Ranjit Atwal, senior director of analyst at Gartner, said falling smartphone and PC sales will result in the chip shortage easing this year.
Atwal predicted that the cycle will be brought forward next year, as he was expecting chip demand and supply to equal out next year. He said that the declining smartphone market was not expected to be offset by the surge in chip demand from automakers.
The Micron executives said they were confident about demand for their chips in the long term, and industry analysts said there was still a lot of demand for chips used in EVs, 5 G and high-speed computing.
The world's largest contract chipmaker, TSMC, has seen its major clients cut chip orders for the rest of 2022, Taiwanese daily Digitimes said on Friday. TSMC didn't want to say anything.
In an effort to check an inventory glut, Samsung Electronics temporarily halted new procurement orders and asked some suppliers to delay or cut components for several weeks, Nikkei said last month.
Micron's chief business officer, Sumit Sadana, said on Thursday that the extent of the shift has definitely been bigger than anyone had anticipated in the ecosystem.
Inflation is the highest in years in many countries, including the United States, which has increased the risk of recession and has resulted in job cuts and tighter budgets.
The company that uses hundreds of chips in its electric cars has shuttered its California office and laid off about 200 workers. Elon Musk said he had a bad feeling about the economy and that the company needs to cut employees by about 10 per cent.
Earlier this week, Volkswagen said chip shortages were easing and starting to offset supply chain bottlenecks and rising costs.
As recently as March, the German automaker warned that supply bottlenecks would hurt growth this year, after it sold 2 million fewer cars than planned last year due to the chip crunch.