PC Demand Suffers 'Steepest Decline In Years' As Chip Shortage Turns To Glut
PC Demand Suffers 'Steepest Decline In Years' As Chip Shortage Turns To Glut
BY TYLER DURDEN TUESDAY, JUL 12, 2022 - 04:25 PM
Demand for personal computers dropped dramatically in
the second quarter, and is down 12.6% over the same period last year - the
sharpest decline in nine years according to the Wall Street Journal, citing research by
Gartner Inc.
According to the report, computer makers shipped 72 million PCs
between April and June, down from 82.4 million during the same
period in 2021.
"The decline we saw in the first quarter of 2022 has
accelerated in the second quarter, driven by the ongoing geopolitical
instability caused by the Russian Invasion of Ukraine, inflationary pressure on
spending and a steep downturn in demand for Chromebooks," said Gartner
research director Mikako Kitagawa.
Another
firm, International Data Corp, found a 15.3% decline in global device shipments in
the second quarter.
Their explanation? People splurged during the pandemic.
In May, several PC manufacturers such as HP and Dell are warning
that consumer appetite for PCs was waning -
particularly for lower-priced products.
And while the drop-off in demand has 'reverberated throughout
the industry' - with Intel and Micron instituting hiring freezes or other
cutbacks to 'adjust to the new market dynamics,' Reuters reports that the supply chain crisis has
now resolved, leaving a glut of chips.
"Like nervous shoppers raiding
supermarket aisles for toilet paper ahead of a COVID-19 lockdown, manufacturers
stockpiled computer chips during the pandemic," adding
that "hoarding is making it worse."
Now, they'll be wrestling with an oversupply amid cooling
demand.
Like nervous shoppers raiding supermarket aisles for toilet
paper ahead of a COVID-19 lockdown, manufacturers
stockpiled computer chips during the pandemic.
Before that, "just in time" manufacturing was the norm
for fiscally conservative companies, which ordered parts as close to production
time as possible to avoid excess inventory, reduce warehouse capacity and cut
upfront spending.
During the pandemic that
shifted to what some jokingly call a "just in case" practice of
stockpiling chips....
Chip
shortages turned into a glut in some sectors, taking
Wall Street by surprise. By late
June, memory chip firm Micron Technology Inc (MU.O) said it would reduce
production. The market reversal caught Micron off
guard, admitted Chief Business Officer Sumit Sadana. read more
As U.S.
chip earnings reporting season kicks off later this month, TechInsights' chip economist Dan Hutcheson
warned of more bad news following Micron's grim forecast. "Micron
kind of plowed the ground, with their honesty," he said. -Reuters
0."Hoarding is a sign they think it's essential until one
day they look at it and say, 'Why do I have all this inventory?" according
to TechInsights' chip economist Dan Hutcheson, who has been forecasting for
over 40 years. "It's kind of like toilet paper."
Who's going to be hardest hit?
According to Tristan Gerra, Baird's senior analyst for
semiconductors, big suppliers of chips to consumer electronics makers,
particularly low-end smartphones, are
basically doomed.
Least
affected will be Apple's suppliers, such as TSMC (Taiwan Semiconductor
Manufacturing Co.), according to Wedbush's Matt Bryson, who notes that demand
for Apple devices remains high. Those who provide automotive
and data center chips will also do well, according to
Gerra.
"In power management, we're going gangbusters," said
one anonymous exec at a global chipmaker, but added that for radio frequency
chips used in smartphones, "we're seeing a pullback because of
handsets."
That said, Bernstein analyst Stacy Rasgon disagrees on
automakers - noting that they ordered far more chips than they needed,
and continue to do so. When automakers stop buying, things will get real(er).
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