The pandemic-era boom in semiconductors that has led to global shortages is showing its first signs of weakness, driven by slumping PC sales and a plunge in the cryptocurrency market, according to the Wall Street Journal.
The frenzy to buy laptops and other gadgets sparked in the early days of the Covid-19 pandemic has faded as inflation discourages people from upgrading the machines they bought over the past few years. The fading cryptocurrency boom also ended an early popular scene of people camping outside computer stores to buy chips for cryptocurrency mining and high-end video games.
Pressure remains unresolved in some high-demand areas such as chips for cars and data centers, but a bleak outlook for consumer electronics has prompted some giants to warn of turbulence in the months ahead after two years of surging demand .
Intel Chief Financial Officer David Zinsner said in June that the outlook for the second half of the year is "noisier" than it was last month, so the company will seek to align spending and investments with that reality. Intel temporarily froze hiring in its PC chip division in June, among other tightening measures.
Memory maker Micron Technology Inc also posted a weak sales outlook last week, with Chief Executive Sanjay Mehrotra warning that "the industry demand environment has weakened" and sales of PCs and smartphones fell. Micron said it was cutting some spending plans to adapt to new market dynamics.
Chip executives, computer retailers and distributors said the market has languished in recent months — more subdued than many expected at the beginning of the year, as U.S. inflation hit 8.6 percent in May, the highest in more than 40 years, leading The Federal Reserve is preparing to raise interest rates.
Kent Tibbils, vice president of marketing at ASI Corp., a major California-based electronics distributor, pointed to a drop in demand for computers around March, saying "the upswings are high and the downsides are dismal," he said. "There are usually more incremental routes. , but it was a bit more volatile than we would normally expect."
Nvidia said it was reducing hiring as the chipmaker braced for a slowdown in two of its key areas — cryptocurrency mining and video games. The company's chips are used for the computationally heavy lifting required to mine new cryptocurrency coins, and are valued by video gamers who bought their graphics cards during the pandemic-era home entertainment surge. Both areas are weakening, with Nvidia stock down 48% in the first half of the year.
Chester Yeung, an executive at California-based retailer Central Computers, said consumers endured about two years of waiting lists, sweepstakes and quotas just for the chance to buy Nvidia's latest graphics hardware. The retailer is now well stocked on shelves, and the rationing that his company introduced during the pandemic this year has been canceled.
"Cryptocurrency prices have plummeted, but also with the stock market plummeting, which means a lot of people have less disposable income as they see their savings plummet," he said.
PC shipments are expected to fall 8.2 percent this year to 321.2 million units, according to the International Data Corporation, which lowered its forecast in June. Those numbers are a far cry from the height of the pandemic, when shipments rose 13% in the first year and 15% in the second.
AMD CEO Lisa Su said last month that the company has taken a conservative approach to the PC market this year and expects computer demand to be roughly flat for the next few years.
Computer makers HP and Dell said they saw weak demand for primarily low-end consumer PCs, slightly offset by healthy company sales.
PC shipments have been hit not only by weaker demand for new equipment, but also by supply chain disruptions caused by China's coronavirus lockdowns and the fallout from Western sanctions on Russia following its invasion of Ukraine.
Analysts are increasingly pessimistic about the chip company's sales outlook. In February, analysts estimated Intel's second-quarter sales to be around $18.4 billion, according to FactSet. The average estimate is now less than $18 billion, below Intel's forecast. Estimates for Nvidia's sales also fell 4% during the period, in line with the company's $8.1 billion sales guidance for the quarter.
"There's a semi-recession every 3 to 4 years, and we're probably going to have another one," Bank of America analysts said last week.
It's not just chipmakers that are changing expectations. Microsoft Corp cut its earnings outlook in June, citing a stronger dollar that has dented its sales abroad and that the company has slowed hiring.
A potential silver lining for customers still in shopping mode is that wait times for some semiconductors are starting to decrease after a two-year chip shortage. Overall chip lead times in May were near a record 27 weeks, according to Susquehanna Financial Group, but wait times for microcontrollers -- the ubiquitous chips that have been a problem for automakers and others -- shortened .
Chip demand pressures are also likely to abate as smartphone sales weaken. IDC expects shipments of these devices to decline this year. Qualcomm's chief financial officer, Akash Palkhiwala, said in June that supply and demand will reach a better balance in the second half of the year.
Despite weak demand, no major company expects to end the semiconductor shortage anytime soon. AMD's Su said demand for chips used in servers -- powerful computers used in data centres -- remains strong, helping to offset some of the PC's weaknesses.
There may also remain a shortage of older chips that have been at the heart of a two-year battle between automakers, gadget makers and others to ensure adequate supplies. A long-term shift in the electronics industry, including a shift to electric vehicles that require more chips, is one reason the shortage may not ease anytime soon, chip executives said.
While companies are bracing for a turbulent future, the overall chip market remains constrained. According to statistics, global chip factories were operating at almost full capacity in the first quarter. Globally, chip sales rose 12% year-over-year in April, according to the latest available data from Gartner World Semiconductor Trade Statistics.
Will the semiconductor industry begin to restructure?
The market value of major semiconductor companies in the world has evaporated by nearly US$1.8 trillion this year due to oversupply concerns. Among them, Taiwan's MediaTek and other companies have shrunk sharply. Analysts warned that "the situation is more serious than the Internet bubble. Except for giants such as TSMC, restructuring may begin. ".
Nikkei reported on the 4th that there should be a shortage of semiconductors, but the sudden emergence of oversupply worries has also caused the stock price of semiconductor stocks to freeze, and the semiconductor industry will begin to restructure? According to data from QUICK FactSet, as of July 1, the market value of the world's 40 major semiconductor-related companies has shrunk to US$3 trillion, an evaporation of nearly US$1.8 trillion (a drop of nearly 40%) compared with the end of last year. Among them, Taiwan's MediaTek, US Nvidia, Germany's Infineon, US Applied Materials, Japan's Tokyo Electron and other companies suffered miserably, with the market value shrinking at the top.
Ming Nan Chuan, an analyst at U.K.-based research firm Omdia, expects all but the most advanced semiconductor products to fall into oversupply, warning that "the situation is worse than the dot-com bubble. Profitability will deteriorate except for the top three manufacturers such as TSMC. , (semiconductor industry) may begin to restructure"
According to reports, the problem of oversupply of semiconductors was the cause of the collapse of the dot-com bubble in 2000, when it was caused by the supply side, which led to overproduction in anticipation of technological innovation. This time, the demand has changed sharply due to external factors such as the epidemic, war, and inflation. Nan Chuanming said, "Production can be effectively controlled, but demand is difficult to control." In times of prosperity, semiconductor demand will increase linearly, but production can only increase in stages, resulting in a sharp increase in repeated orders. And once the economy slows down and demand stops, it will lead to "unintentional inventory" inflation.
Nomura Securities estimates that global semiconductor sales will shrink by 0.5% in 2023, and the decline may expand to "5-9%" depending on the economic situation.
According to the quotation of the MoneyDJ XQ global winner system, so far this year (US companies are closed as of July 1, and the rest are July 4), MediaTek's stock price has plummeted 48.66%, Nvidia plummeted 50.62%, Yingcai plummeted 45.18%, Tokyo Weiliq It plunged 36.01%.
