The reason for the surplus of chips is due to the strong demand and insufficient supply. This dates back to the COVID-19 lockdown in the second quarter of 2020, when demand for work-from-home technology grew exponentially and automakers found themselves vying for semiconductor capacity at Asian foundries. These supply chain issues have sparked upheaval in the auto industry, hampering production and denting sales.
However, over time, market demand did not grow as expected, resulting in overcapacity. In late June, memory chip company Micron Technology said it would reduce output.
In addition, due to reasons such as U.S. sanctions, some chip manufacturers had to transfer production lines from China to other countries, which also exacerbated the situation of chip surplus. In China’s chip industry, with the support and encouragement of national policies, more and more companies have begun to enter the industry, resulting in fierce market competition.
Moreover, in the chip industry, technology is updated very quickly. For some companies, they do not have enough strength and technology to keep up with the pace of the market, which also leads to a surplus of chips. Therefore, the chip industry needs to strengthen technological innovation and strength improvement to meet market demand. At the same time, it also needs to plan production capacity reasonably to avoid overcapacity.
However, automakers are increasingly demanding chips with higher computing power, which are fundamentally different from those used in personal computers and smartphones, especially as the industry transitions to electric and self-driving vehicles.
At present, electronic consumer chips are surplus, and many industries can normally order from the original electronic parts manufacturer without long-term ordering, but it extends to many other industries, such as the automotive field, industry expert Stacey Automakers are ordering far more chips than they actually need, said Stacy Rasgon, chief executive of the automaker. Therefore, there are still some problems. In this case, you can find some electronic components from China. Many Chinese electronic component traders have stocked some parts with high market demand, but the price is a bit high.
Specialists say the microchip excess has hit unevenly across business regions. Large providers of chips to hardware producers will be hit hardest by the downfall, said semiconductor master Tristan Gerra.
Microchip configuration organization Nvidia Corp could be hit particularly hard as costs keep on falling, Gerra added. Nvidia produces realistic chips utilized for gaming and the advanced cash known as digital currency.
Among those most un-impacted by an excess are Mac Inc’s providers like Taiwan Semiconductor Assembling Co, said microchip master Matt Bryson. Request stays high for Apple gadgets.
Industry leaders and specialists can’t say the number of excess chips that are in storerooms all over the planet. Be that as it may, industry master Imprint Lipacis said supply numbers for the initial three months of 2022 hit a record high at significant gadgets producing administrations organizations. The prior record was quite a while back.
Producers might choose to go through contributes storerooms as opposed to purchasing new ones, and drop orders, Lipacis cautioned.
A few specialists said car chipmakers are ok for the time being. Yet, that may not keep going long.