WSJ: Chip shortages are declining due to lack of consumer demand for tech

The global chip shortage should decrease sharply in the coming months due to limited consumer demand for tech products, writes The Wall Street Journal. Many tech companies are therefore building up too large a stock.

Chip wafer image via TSMC

Micron, among others, states against the newspaper that the chip inventory would be “well above the target level”. HP CEO Enrique Lores underlines this: “We currently have a very large inventory, especially of consumer products, which creates very aggressive pricing because all the tech companies want to sell their inventory.” Intel, Nvidia and AMD also said they had too much stock this fall.

Although estimates differ per company, the CEOs of the parties mentioned agree that the excess inventories can only be reduced to normal levels in the course of 2023. Nvidia estimated that this should already happen in January, while Micron expects to reach a normal level around September. The company announced earlier this month that it would cut 10 percent of all jobs worldwide due to the “imbalance between supply and demand”.

The current stock surplus is the result of, among other things, the corona pandemic; from 2020, the demand for electronics suddenly became extremely high because people had to work from home en masse. This resulted in record profits for many tech companies. Now that the lockdowns are largely over, demand for consumer tech is said to have fallen sharply. This effect is amplified by the supposed impending recession and the indirect effects of the war in Ukraine.