Chipmakers Struggle With Inventory Buildup On Pandemic Demand Correction

  • Pandemic recovery, rising interest rates, a falling stock market, and recession fears have weakened consumer appetite for electronics.
  • Retailers are stuck with goods on their shelves, and producers of products in high demand early in the pandemic battled surplus inventory, the Wall Street Journal reports.
  • Consumers can avail products from washing machines to laptops faster and sometimes more cheaply than a year ago. 
  • For chip makers, the shift triggered a wave of job cuts and reduced capital spending to restore profitability levels that have eroded in recent months.
  • Chip inventory levels exceeded way beyond target level, Micron Technology, Inc MU CEO Sanjay Mehrotra said after missing Wall Street earnings projections, gave a subdued outlook and said it would cut about 10% of its workforce
  • Leading PC makers HP Inc HPQ and Dell Technologies Inc DELL also remained stuck with excess goods on their shelves compared to a year ago.
  • Intel Corp INTCAdvanced Micro Devices, Inc AMD, and Nvidia Corp NVDA also expressed their concerns over excess inventory likely to stay elevated.
  • Micron expected the situation to persist through its fiscal year's first half.
  • Smartphone sales, too, deteriorated, denting chipmakers' fortunes. Micron, Qualcomm Inc QCOMSamsung Electronics Co, Ltd SSNLF, and Apple Inc AAPL repeatedly cut their sales projections this year.
  • However, the industry expected chip sales to double by 2030, surpassing $1 trillion globally. Micron eyed a facility in upstate New York that could cost up to $100 billion, partly funded by U.S. government incentives.
  • Some chip makers like Lattice Semiconductor Corp LSCC saw the inventory buildup as an opportunity
  • Price Action: MU shares traded higher by 0.68% at $50.54 in the premarket on the last check Tuesday.
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