Chip Glut Predictions
Whether car, computer, or video game, semiconductor chips are used in a lot of different products. The recent shortage has led to price spikes and delivery delays.
Recent earnings reports from NVIDIA (NVDA) and Micron Technology (MU) suggested the crisis may be abating, as they forecasted a supply glut following ramped-up production. But, as they say, the devil is in the details. For consumers looking for price-relief or delivery of that coveted EV, the wait is unlikely to end anytime soon. For now, a potential chip glut is likely to be limited to just one industry: personal computers.
As the emphasis on remote school and work unwinds, the demand for PCs and the chips that provide their functionality have fallen. That said, other chip-reliant products and industries are still scrambling to get the components they need.
Cisco (CSCO), which creates the machinery that powers internet networks, can’t get the components it needs. The company says it doesn’t see the issue being resolved by its fiscal year end in July 2023. The company’s CFO, Scott Herren, is optimistic that in time some factories will shift production from PC chips to build needed components. Analog Devices (ADI) is a beneficiary of the chip shortage. Its revenue is growing along with its backlog of orders.
Chips for the Chip-Maker
A further indication that the anticipated chip glut may be a ways off is the current status of Applied Materials (AMAT), which provides equipment and software used to manufacture semiconductor chips. This week, company executives said they’re having difficulty fulfilling incoming orders. The reason? They can’t get enough chips themselves. CEO Gary Dickerson anticipates the shortage will continue for months.
Unless you’re in the market for a PC, the chip shortage will continue to be a thing. By now you likely already know the result: ongoing delivery delays and high prices for select products.
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