Semiconductor manufacturers could redeploy their capabilities quickly enough to serve distressed sectors more quickly. The risk, going from shortage to overproduction.

The chip shortage continues to painfully affect many industrial sectors, starting with the automotive sector. “No one has had exposure for more than a month and according to semiconductor manufacturers we shouldn’t expect a return to normal before 2023” a BFM Business analyst complained a few days ago.

Although many large foundries such as Intel or TSMC have announced the strengthening of their production capacities and / or the opening of new factories, these measures will take time. Too much time for customers whose supply has run out due to a lack of these components.

But there is little hope that this shortage will end a little sooner than expected. The inversion of the computer market (after the outbreak due to confinements in 2020-2021) and the collapse of that of cryptocurrencies that brings with it that of graphics cards (which are used for mining) could give oxygen to the giants of the semifinals.

-8% this year for PC sales after two hot years

Schematically, semiconductor manufacturers could redeploy their capabilities to serve troubled industries faster thanks to less demand from PC, smartphone and graphics card makers.

Let’s start with the computer market. Research firm IDC expects global sales to decline more than 8% this year to around 321 million units. The renewal of the machines, both on a personal and corporate level, now seems complete after the historic leaps of + 13% and + 15% in 2020 and 2021.

In addition, runaway inflation (8.6% in the United States in May) weighs on the demand for technology and connected products such as smartphones, whose sales are expected to decline again this year.

Illustrating this trend, Intel temporarily halted hiring in its PC chip division in June, among other downsizing measures, while memory maker Micron points out that “the industry demand environment has deteriorated. It has weakened.” .

Reduced delays for microcontrollers

As far as cryptocurrencies are concerned, the price drops observed over several weeks are causing the demand for graphics cards to plummet. Just look at their prices: according to the specialist site Toms Hardware, they have already dropped 15% in May with a return of stocks at retailers.

Industry leader Nvidia has also reduced the pace of its hires and replenishes its stocks. The market has taken this climate change in tech well: the manufacturer’s share price fell 48% in the first half.

As a result, all major foundries are revising their forecasts downward as they redistribute their capabilities to serve sectors with broken chips.

Therefore, if chip lead times were at a near-record high of 27 weeks in May according to Susquehanna Financial Group quoted by the Wall Street newspaperwaiting times for microcontrollers, especially these ubiquitous chips in automobiles, have been reduced.

Nor should we expect this deficiency to end suddenly. According to Gartner, chip factories around the world were operating at near full capacity in the first quarter, but the redeployment of capacity could allow them to be completed by the end of the year rather than 2023.

Does capacity increase when demand decreases?

But this development could have a perverse effect. Combined with manufacturers’ initiatives to increase their production, particularly through new factories, it could eventually lead to overproduction.

The sector “is characterized by an alternation of phases during which supply is greater than demand and phases during which it is the opposite” underlined at the end of 2021 Mathilde Aubry, professor-researcher, holder of the chair of direction of digital transformation by EM Normandie in a relationship.

Consequently, “when all the new fabs (factories, ed.) Are operational, the increase in prices that we can currently experience will have led to a drop in demand. The consequence will therefore be a new phase of surplus (supply greater than demand). These factories may not be profitable, especially as they are rapidly becoming obsolete in this sector. “

It therefore remains to be seen whether the mega-investments of manufacturers such as Intel will be maintained or not. Or if Europe wants to adapt the Microelectronics Alliance aimed at reconnecting with the European production of semiconductors.

To begin with, Thierry Breton, European commissioner indicated, will be allocated between 20 and 30 billion euros and up to 20% of the recovery plan or 145 billion euros for fourth generation chips.

Olivier Chicheportiche BFM Affari Journalist

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