Component News August 18, 2023
Managing Electronic Component Oversupply

Managing Electronic Component Oversupply

Electronic Component oversupply eases while demand struggles to recover.

In the world of chipmakers, the once pervasive semiconductor supply glut is showing signs of easing, bringing a glimmer of hope to the industry. However, demand from customers outside the AI sector remains subdued due to spending cutbacks amidst a weak global economy, high inflation, and rising interest rates. Major chip markets like smartphones, PCs, and data centers have all experienced contraction this year, contributing to a record operating loss for industry giants Samsung and SK Hynix.

Production cuts and the decline in PC shipments easing have contributed to the easing of the glut. PC shipments declined by 11% in the June quarter, compared to a 30% slump in each of the previous two quarters. Similarly, the smartphone market has shown signs of recovery, with cellphone shipments falling by only 8% in the June quarter, an improvement from the 14% drop in the first quarter.

Although PC shipments are showing signs of improvement, the recovery of demand remains slow. As a result, shipment forecasts for PCs and smartphones have been downgraded from earlier predictions. Interestingly, while there is a surge in demand for chips supporting generative AI, the AI sector currently represents a relatively small fraction of overall chip demand, leading some companies to prioritize investments in AI at the expense of other areas.

The situation is complicated further by the sluggish recovery in China, the world’s largest chip buyer. Samsung and SK Hynix note that China’s reopening has not met expectations in reviving the smartphone market. Consequently, they are extending production cuts of NAND memory chips, widely used in smartphones for data storage.

Despite these challenges, manufacturers of chip-making equipment, such as KLA Corp and Lam Research, are already reaping the benefits of the AI boom. Companies involved in AI-related chip production are witnessing increased demand. SK Hynix, for instance, reports that demand for AI server memory more than doubled in the second quarter compared to the first.

As the industry navigates the fluctuating landscape of semiconductor supply and demand, businesses need to remain adaptable and responsive to the market shifts. While electronic component oversupply is slowly easing, the recovery in demand remains cautious. Companies should strategically evaluate their investments and explore growth opportunities in AI-related chips to thrive in this evolving landscape.

Get A Qoute

Aegis Components provides electronic and electrical components from verified suppliers to ensure that the quality you expect is delivered every time.

Contact Information

Fill up the form and our team will get back to you within 24 hours.

    */ ?>