Semiconductor boom could be coming to an end – analysts The semiconductor market is flattening out after a period of record revenues, according to research outfit Omdia. The report joins a growing list of warnings that the chip industry is heading for a slowdown because of companies stockpiling components and global economic effects such as inflation. Omdia's latest analysis of …
"the chip industry is heading for a slowdown because of companies stockpiling components"
Stockpiling components from where ?
We've been repeatedly told about shortages, especially in the automobile industry, and now, suddenly, there are companies that have magically created stockpiles of stuff ?
Someone needs to explain this to me.
If there are shortages because of supply chain fsckups
So if the same number of wafers have been run, because the fabs run 24x7. But they didn't get packaged, cos the packaging is low profit so it's done in 3rd world countries that got hammered by covid.
Or they got packaged but are sitting in a warehouse in China with the workers in lockdown or they can't get truck drivers, or it's not worth shipping them when a container costs $20-30K instead of $2k
Or every customer is ordering 10x, hoping to get 10% of what they asked for, and they're putting in 52 week lead time orders with a dozen suppliers - just in case.
So everyone goes into overtime to frantically meet this demand. And suddenly this unwinds and we have a glut
I can give you an example. A start up is launching a product and there is a rumour that a key MCU is going out of stock everywhere.
The owner only managed to secure 1000pcs when sent an order to the factory to build a first batch.
Couple of months later, turns out the demand for the product is great and that 1000 is going to sell quickly.
Time for a second slightly bigger batch. Now, the factory says they no longer have the MCU. They can still make the product, but you'll have to solder it yourself. You place an order anyway and then look for MCUs.
Panic sets in and your see distributors set lead times for over a year. You think you are going to sell 5k units easily so you place back order for 5000 MCUs and in the meantime call brokers if they have any stock left.
You manage to score 2000 at double the price just enough for the second batch. You found a local shop that will solder the MCUs. Crisis averted.
In the meantime cost of living crisis and sales are steadily going down. You learn that another part that your product uses is sold out everywhere, so you think you are going to wait this one out.
Then suddenly a box of 5000 MCUs shows up at your door.
What do you do? Do you flog it on eBay or do you keep a hold of it just in case?
Multiply that by thousands.
Then you have scalpers seeing that certain MCUs are in demand and also placing orders hoping to resell at premium.
In the meantime other businesses are either closing, because you cannot sustain paying for an office and a team for over a year without being able to build any products - or trying to develop for MCUs that are available in reasonable quantities. Mind that other businesses are doing exactly the same and so the alternative MCUs also go out of stock shortly.
In the end businesses end up with stockpiles of MCUs and no products to sell.
To do with the crypto crash? (couldn't happen to a nice bunch of scammers/chancers/fools bros).
I suppose it could also be down to other parts in the chain - capacitors for example have also been getting scarce, wouldn't surprise if this also applied to other parts like the circuit boards or etch chemicals. It doesn't take much to disrupt such an interconnected market as we've been shown recently.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2023
