American Media: How the World Goes from Chip Shortage to Severe Excess Semiconductors | Epidemic | Shortage
According to a report on July 27 on the website of the US Consumer News and Business Channel, when the COVID-19 was the most serious, semiconductor shortage affected various products from cars to game controllers. But now semiconductor shortage has turned into chip surplus, and some of the world's largest chip manufacturers are suffering.
Semiconductors are small components that are integral to a range of products including refrigerators, cars, smartphones and LED bulbs. The new crown outbreak has severely disrupted chip supply chains and production activities, as home-based consumers are keen to buy products such as personal computers and smartphones. This is driving demand for semiconductor products.
The demand for less advanced chips has also increased, such as those required for programs such as equipment power management.
This has led to a general shortage of products such as game controllers and even washing machine parts, which will continue until the first half of 2022. There is also a shortage of semiconductors for automobiles, which has led to a decline in vehicle production by major automakers.
While supply and demand dynamics for some chips have become more balanced since then, in other areas, chip shortages have turned into oversupply. There are currently two types of chips in oversupply, namely NAND flash memory and dynamic random access memory. These chips are used in devices such as laptops and servers in data centers.
There is an oversupply as companies hoard chips to increase inventories when there is a shortage of supply.
But then the economy slowed.
Demand for products such as smartphones and laptops has dropped significantly-especially considering that many people bought these products during the pandemic.
Peter Hanbury, a partner in Bain's telecommunications, media and technology business, said: "As the end market stopped ordering chips and instead focused on relying on existing inventory for sales, the demand that soared during the chip shortage suddenly dried up."
However, not all types of semiconductors are in oversupply, and demand for chips in the automotive industry remains strong.
Some chips for specific uses cannot be easily swapped for other semiconductors, so "their delivery times and prices are adjusting, but they are still high," Hanbury said ".
As prices rise, the semiconductor shortage caused by the outbreak has helped push up the profits of chipmakers, including Samsung, the world's largest maker of memory chips.
However, Samsung and its competitors SK Hynix and Micron Technology have had a hard time this year.
Samsung said on the 27th that operating profit in the second quarter of this year plummeted 95% year-on-year. 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, said last week that its second-quarter net profit fell 23.3 per cent from a year ago. It was the company's first decline in quarterly profits in four years.
Looking ahead, the PC market looks set to weaken, which is likely to hit Samsung, SK Hynix and Micron.
For TSMC, the global smartphone market-the main driver of the company's revenue-is also under pressure.
"The smartphone market is still the largest component of TSMC's revenue. This part has not seen any meaningful recovery," said Wu Sihao, an analyst at Hong Kong-based Huaxing Securities."
In order to increase chip prices and reduce market supply, major memory chip companies announced production cuts.
Samsung said it expects global demand to recover in the second half of the year.
"After this year's adjustment, I think TSMC may grow in the second half of the year, but the intensity of the growth will depend on the macro environment," Wu Sihao said."
Ultimately, the recovery of these companies will depend on whether demand for end products such as consumer electronics will pick up, but this is related to the macroeconomic recovery, which seems far from certain.
