The semiconductor industry has swung from one extreme to another, going from a shortage to a glut as consumer demand changes.
During the height of the pandemic, semiconductors were in short supply. A combination of production issues as a result of lockdowns, combined with increased demand for computers and other electronic as people worked from home, led to a massive shortage of chips. The shortage was also spurred by stimulus money being poured into the economy, giving individuals more disposable income to spend on tablets, gaming consoles, and more.
According to The Wall Street Journal, that situation has changed dramatically as consumer spending has decreased. The overall economy is in the midst of a downturn, with stimulus money having long-since dried up, layoffs impacting multiple industries, and growing uncertainty about the future of the economy.
The result has been increased availability of computers and other electronics, not to mention falling prices.
“Today we have a large inventory, especially on the consumer side, which is driving very aggressive pricing because all of us are trying to reduce those inventories,” said HP Chief Executive Enrique Lores.
Chipmakers and PC manufacturers are already taking steps to stabilize supply and demand such as reducing the number of chips they manufacture, or computers they ship, to help drive up demand.
“Even as they were selling through their inventory, they were not replenishing stock to the same levels,” said AMD chief Lisa Su. “I think the market will continue to be volatile.”