Now There are Too Many Computer Chips

by Tech Mainstream

July 13, 2022

Now There are Too Many Computer Chips

Apparently the computer chip shortage caused by a supply chain crisis triggered by the global pandemic has subsided. The computer chip oversupply occured from late May to June, as high inflation, China's latest COVID lockdown, and the war in Ukraine decreased consumer spending, especially on PCs and smartphones.

Instead of following the "just in time" manufacturing model, chip manufacturing adhered to "hoarding" computer chips:

"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."

The "just in case" practice of stockpiling chips has resulted in big suppliers of chips and consumer electronics makers, especially low-end smartphones, to be impaired most by the downturn. The chip oversupply has caused prices to fall and manufacturers to be negatively affected economically as a result.

Whereas some manufacturers, such as Apple Inc's suppliers such as the world's top chip factory Taiwan Semiconductor Manufacturing Co (2330.TW), demand remains high for Apple devices, which are notably upmarket.

The intense demand for chips for automotive and data centers will also keep chipmakers successful, hopefully:

"Manufacturers may decide to use up chips in warehouses instead of buying new ones, and cancel orders, Lipacis warned. Auto chipmakers are safe for now, some analysts said. But that may not last long."