Recently, news about a total shortage of chips has been replaced by information about the easing of the situation. Moreover, according to some reports, TSMC is asking its employees to go on vacation as computer manufacturers have noticeably reduced order volumes, and orders from smartphone manufacturers have decreased even more, the trend is expected to continue into 2023. Meanwhile, while some manufacturers have no shortage of semiconductors, many companies are still suffering from severe shortages.

 Источник изображения: Micron

While TSMC's top customers Apple, AMD, Intel, MediaTek, NVIDIA, and Qualcomm are constantly developing ever-improving process technologies, at the moment they are very "conservative" in terms of sales forecasts and release orders. In other words, leading vendors of electronics components do not need many chips yet.

This is not surprising since the demand in this sector is largely driven by PC demand which rose to record levels in April 2021, sales of the top six PC manufacturers grew at a double-digit percentage rate, and Chromebooks grew for some time. even three digits. This trend could not last forever, and data has already appeared on the sale of individual Chromebook models for literally $79 (in the US) - even components for them are more expensive, but the market is already packed and demand is satisfied almost for years to come. At the same time, in order to release new models manufacturers have to clear warehouses from old ones and there is no need to expect high demand for components in this segment in the foreseeable future.

For example, during its latest earnings report Micron Tecnology pointed out that demand in year 2022 will be lower than supply on average leading to high inventory buildup in suppliers' warehouses. Deficit usually initiates large-scale investments in the construction of new facilities and the development of new technical processes, as a result, from time to time there is a crisis of overproduction. There is a surplus in many industries, but not all. In particular, there is no abundance in the market for car chips.

The fact is that most semiconductors for cars are produced in accordance with the so-called "mature" technical processes, most of the demand is for 90-nm semiconductors. It was these that were considered the most advanced solution around 2002, that is 20 years ago. Nevertheless, they are quite in demand, since many components simply do not need cutting-edge technologies, and the process of switching to them is costly and time-consuming.

Factories continue to use old production tools and, since this segment is not the most profitable, there was no need for most manufacturers to invest in new capacities. Such semiconductors were already in short supply by the beginning of the pandemic, and in 2020 there was an approximately eight-week period when, due to COVID restrictions most car factories had to partially or completely suspend work after which they withdrew their orders for semiconductors.

In the meantime, explosive growth in other sectors that require the use of chips has led to the fact that "obsolete" production was completely loaded, and according to Forbes, when automakers tried to restart orders delivery times for them increased catastrophically - they still cannot keep up with the deficit.

In other words, the semiconductor market is heterogeneous and today it is impossible to say that it is experiencing a decline or rise in general.