Computer chip supply could be recovering as inflation weighs on demand
There are signs of a potential recovery in the supply of computer chips, as a handful of the world’s largest semiconductor firms caution weaker demand.
The supply of semiconductors, microchips used in most of today’s electronics, is “gradually improving” following several years of trickling quantities and rampant demand, British electronic components manufacturer DiscoverIE said yesterday.
Bosses within the semiconductor industry have described the chips market as cyclical, with ebbs and flows of over and under supply.
Demand for semiconductors exploded during the pandemic when consumers flocked towards new tech and businesses such as automotive firms sought to electrify their offerings.
But as the global economy slows, “expectations are rising that demand for semiconductors will wane and there are already signs that supply chain problems are easing,” senior investment and markets analyst at Hargreaves Lansdown, Susannah Streeter, told City A.M. yesterday.
Taiwan Semiconductor Manufacturing Co (TSMC), one of the biggest chipmakers in the world, yesterday revealed it is seemingly cautious about upcoming demand amid rising inflation, having cut its capital expenditure by 10 per cent for 2022 to around $36bn (£32bn).
The mark down comes amid a growing choir of industry leaders warning of a decline in demand for semiconductors after several golden years for trade.
The CEO of Samsung Electronics last month warned that the company was bracing for a slide in momentum in the coming months.
“The second half of this year looks bad, and as of now, next year doesn’t really seem to show a clear momentum for much improvement,” co-CEO Kyung Kye-hyun, who heads Samsung’s semiconductors unit, told reporters at the time.
Intel earlier this week was reported to be readying to cull thousands of jobs as the chipmaker attempts to fight off a sales slowdown.
According to initial reports from Bloomberg, the layoffs will be announced as early as this month, slimming back its 113,700 global workforce by as much as 20 per cent.
In July, the company warned that 2022 sales would be about $11bn (£9.8bn) lower than previously expected as PC processor sales slump and rivals swarm the market.
A spokesperson for Intel said the firm does not comment on rumours or speculation.
The market is likely to remain “volatile” over the coming years, Streeter continued, as the sector bares the brunt of geopolitical headwinds between the US and China.
“On one hand the intensifying US China chip wars could disrupt production, but on the other huge sums being poured into subsidising home-grown industries could lead to deep pockets of overcapacity,” she added.
Chief market analyst at investment platform IG, Chris Beauchamp, added the now, “the question is whether demand will recover as prices soften, or whether we are heading further toward recession, hurting demand again.
“Given the current outlook, I suspect the latter is the more likely scenario.”