Global Computer Chip Shortage May Be Easing

The global shortage of computer chips may be easing. Autoblog is suggesting the demand for the chips may be ramping down just as quickly as it ramped up two years ago when the Covid 19 pandemic struck and relegated many people to working and learning online. That caused demand for laptop computers and smartphones to explode, which sucked up the supply of chips and left too few for automakers at a crucial moment when cars are becoming more and more like computers on wheels.

Citing a report by Reuters, Autoblog says chip makers Micron and AMD say rising inflation is slowing economies around the world which in turn is leading to a decrease in demand for laptops and smartphones. Ranjit Atwal, senior director analyst at Gartner, said falling smartphone and PC sales will result in the chip shortage easing this year.

Atwal, who was expecting chip demand and supply to equal out next year, predicts that cycle will be brought forward to this year. He said the declining smartphone market was not expected to be offset by any surge in chip demand from automakers.

Micron Technology, a maker of memory chips, forecast on Thursday much worse than expected revenue for the current quarter and said the market had “weakened considerably in a very short period of time.” Chip stocks fell on Friday for Taiwan’s TSMC and MediaTek, Dutch chip-gear maker ASML, Franco-Italian firm STMicroelectronics and Germany’s Infineon. Sales of smartphone are down 30% in China so far this year.

TSMC, the world’s largest contract chipmaker, has seen its major clients cut chip orders for the rest of 2022. Samsung Electronics, the world leader in memory chips, has temporarily halted new procurement orders and asked some suppliers to delay or cut shipments of components for several weeks, Nikkei said last month.

“I think the extent of the shift has definitely been bigger than anyone was anticipating in the ecosystem,” Micron’s chief business officer, Sumit Sadana, said on Thursday. In addition, inflation is the highest in years in many countries including the United States, which has increased the risk of recession and is leading to job cuts and tightening budgets.

Chip Demand Is Easing

Throughout the pandemic, chip makers were overwhelmed trying to meet big orders from makers of smartphones and personal computers that saw a surge in demand from people working from home. The resulting chip shortage led companies, including automakers, to slash production, delay shipments, and pay steep premiums for key chips.

Earlier this week, Volkswagen said chip shortages were easing and that it was starting to see an end to supply chain bottlenecks and rising costs. As recently as March, the company was warning that supply bottlenecks would hurt growth this year after it sold 2 million fewer cars than planned last year due to the chip crunch.

The rapid change in markets caused by the coronavirus has totally befuddled many industries. Rental car companies, anticipating sharply lower business, rushed to sell of their fleets of cars, only to find demand was stronger than expected, which led to a steep increase in rental rates. Chip makers were blindsided by the virus and the market shifts it brought with it. Now the are being blindsided once more as the market shifts in the opposite direction.

A Comment

Someone with the user name Sean posted a comment to the Autoblog story. “Given that every MAGA fanatic was so quick to Blame Biden for the workings of the private marketplace that saw chip shortages, I will just wait here for all of them to post messages congratulating President Biden for fixing it. Because we all know they will want to correct to record, rather than simply down vote me like a coward,” he said. He promptly got down voted 19 times. We swear we are not making this up!

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