PC Chip Shortage Has Swung To Oversupply Situation; Samsung Cuts Sales Forecast by Almost One-Third

There are indications that the semiconductor supply chain issues that tightened availability of electronics components and extended manufacturing and delivery times on key components has eased, and that the situation has already swung to an oversupply situation because of slumping demands for PC products.

Samsung Electronics, the world’s largest memory chipmaker, has lowered its sales forecast for the second half of 2022 by 30+ percent – citing a slowdown driven by inflation globally.

Korea Economic Daily suggests the semiconductor industry “has entered a full-fledged ice age” that won’t start to thaw until semiconductor inventories are eliminated.

None of this should be a surprise as we recently outlined PC Demand Suffers’ Steepest Decline In Years’ As Chip Shortage Turns To Glut. 

“Both DRAM and NAND flash suppliers and customers are holding too many semiconductor inventories,” an official told Korea Economic Daily. 

Another top semiconductor company, Japan’s Kioxia Holdings Corp, announced it would slash wafer production starts by 30% next month, according to Bloomberg.

“The deep cuts stem from weakening demand for computers and smartphones, and the wider semiconductor industry is likely to follow the trend.

“Hard times are ahead for the industry, except for a few,” said Kazunori Ito, an analyst with Morningstar. 

These souring developments in the global semiconductor market come as the largest US manufacturer of memory chips, Micron, reported revenue that missed (despite a slight beat on EPS and margins), but it was the forecast that again was a total disaster. 

Micron offered one of the most significant recession warnings so far from a large corporation: “results were impacted by rapidly weakening consumer demand and significant customer inventory adjustments across all end markets.” It added that due to the sharp decline in near-term demand, it expects “supply growth to be above demand growth in calendar 2022.”

“Yes, we have a challenging market environment, but we’re responding rapidly with actions … fiscal 2023 is, of course, an unprecedented environment, but the long-term drivers are intact,” Micron CEO Sanjay Mehrotra said in an interview. 

But it’s just not memory chips. We pointed prices of graphics processing units (GPUs) have plunged to their lowest levels ever in China, and chip deflation was already washing ashore in the US. 

The positive side of this, of course, is supplies are around now (it seems, least) and in oversupply situations, there are perhaps deals to be had.

The other good news is that shipping container costs have come way, way, way down from COVID-era highs.

A lot of the chip story has been about automotive, which still has a supply issue. But those are cheaper, simpler chips from high-end PC components used for devices like smartphones and notebooks.