The new crown epidemic period, due to consumers at home buying products such as computers and phones surge in demand, resulting in an oversupply of semiconductors, affecting a variety of products such as cars, game consoles and other products, this semiconductor shortage situation has continued until the first half of 2022.
However, as the economy has slowed, the semiconductor shortage has turned into a glut. There is now an oversupply of NAND and DRAM memory chips, two types of storage chips used primarily in laptops and data center servers. That’s because when there was a semiconductor shortage, many companies stocked up on chips in order to prepare for them. But when demand for products such as smartphones and laptops plummeted after the economic slowdown, those companies stopped ordering chips and instead focused on selling the inventory they already had.
“This led to a severe ‘bullwhip effect’ where what had been high demand for semiconductor makers at the back end of the supply chain suddenly disappeared as the end market stopped ordering chips and instead focused on selling the inventory it already had.” Peter Hanbury, a partner in Bain & Company’s telecom, media and technology group, said.
Not all types of semiconductors are in surplus, however, and demand for chips in the automotive sector remains strong, Hanbury said, noting that some specialized chips are not easily replaceable, so “their lead times and prices are improving, but they are still high.”
It is noted that the semiconductor shortage has helped boost profits for chipmakers, including Samsung, the world’s largest maker of memory chips. This year, however, Samsung and its rivals SK Hynix and Micron have hit a rough patch.
Samsung said Thursday that second-quarter operating profit fell 95 percent from a year earlier. Meanwhile, SK Hynix posted a loss in the second quarter, compared with a profit in the same period last year. TSMC, the world’s largest chipmaker, also said its second-quarter net profit fell 23.3 percent year-on-year, marking the company’s first quarterly profit decline in four years.
Looking ahead, the PC market looks weak, which could affect Samsung, SK Hynix and Micron. For TSMC, the global smartphone market — one of its main sources of revenue — is also under pressure.
In an effort to raise the price of chips and reduce supply in the market, major memory chip companies have announced plans to cut production. Samsung has said it expects global demand to recover in the second half of the year, and other companies have expressed similar views. However, TSMC said last week that it expects customers to “continue to make inventory adjustments”.
The recovery of these companies will depend on whether demand for end products such as consumer electronics picks up, but this in turn is related to the macroeconomic recovery, which looks far from certain.
