Demand for electronics is falling. But some types of semiconductors are still in short supply.
Demand for electronics is falling. But some types of semiconductors are still in short supply.
There was news on electronics spending Friday. Samsung said it expects profits to fall 32% in the third quarter compared to the same time last year. That’s because people are buying fewer Samsung devices. Computer parts company AMD also said profits are looking weak. That’s because people are buying fewer computers. Less demand for electronics means less demand for the semiconductors, or silicon chips, that go into them.
Which sounds like welcome news, given how tight semiconductor supplies have been during the pandemic. And the shortage isn’t over yet.
Now that people aren’t buying as many computers and computer parts, the makers of those products don’t need as many chips, said Stacy Rasgon, an analyst at Bernstein.
“If I’m Dell or HP or something, maybe I sell PCs, but I just don’t buy any processors and I just use the ones that I already have on the shelf,” he said.
As a result, Rasgon said, the semiconductor shortage is starting to turn into a glut. At least when it comes to the chips that go into laptops and smartphones, said Glenn O’Donnell with the research company Forrester.
“We may not have a shortage of chips on the high end, but we still have a shortage of chips on the low end,” he said.
O’Donnell said lower-end chips are used in different products, like vehicles.
That means you can’t just take a chip out of a PC and drop it into an F-150.
And unlike electronics, vehicles are still in high demand.
David Whiston, an auto analyst at Morningstar, said the surplus of high-end chips could eventually benefit auto manufacturers.
“It can help the chipmakers perhaps reallocate some production capacity back towards automotive,” he said. “That’s not something you can do in a week or two, though.”
Meanwhile, automakers are trying to figure out how to adjust their production.
Alan Amici, CEO of the Center for Automotive Research, said that means allocating their chips to vehicles with higher profit margins.
“So pickup trucks and SUVs,” he said. “You know, if you’re looking for a car, that may be a small car or something that isn’t necessarily a high-profit car, automakers may not be building those right now.”
Amici said he expects the shortage of low-end chips to constrain auto production well into next year.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
