PC Sales Take Pressure Off Chip Demand
That's good news for consumer, but not for the chip shortage.
We've discussed a parade of stories about the continuing chip shortage that started in 2020 because of surging demand, pandemic related factory shutdowns, logistics issues and fires and weather problems. The shortage has continued as logistics problems remained, China experienced a new round of partial factory shutdowns from COVID and Russia began a war in Ukraine.
Through all that we rarely talked about demand because demand stayed pretty high.
Until now. So let's explain what's happening here.
Two things are starting to drive down demand. One is the crash in cryptocurrency which has reduced the demand for new equipment to expand cryptocurrency businesses. The other is a decline in PC sales.
The demand to upgrade for home offices has abated and the rise of inflation has dampened demand even more.
While demand for chips in cars and data centers is still strong, the decline in consumer demand has companies rethinking investments.
Intel CFO David Zinsner calls the outlook for the second half "noisier." Intel froze hiring in its PC-chip division in June.
Micron CEO Sanjay Mehrotra warned last week that demand has weakened because of declines in PC and smartphone sales and Micron will cut back spending to adjust.
Nvidia is reducing hiring as crypto miners and video gamers are both reducing purchases. Central Computers told the Wall Street Journal it now has well-sticked shelves of chips and cards and has ended restriction on purchases introduced in 2020.
AMD says it expects demand to be flat for the next few years but data center demand should make up most of the difference. HP and Dell report consumer demand softening while company sales make up some of the decline.
And Qualcomm, which sells mostly chips for smartphones, says it sees supply and demand coming into balance in the second half.
IDC expects PC shipments to fall 8.2% this year after 13% growth in 2020 and 15% in 2021.
So... will this ease the chip shortage? Yes and no.
Yes, for consumer who can still afford to buy a new GPU or PC, you shouldn't have as much trouble getting one.
No, for the wider chip industry as demand from business and cloud computing will stay high. And demands for older chips used in vehicles and other electronics has not fallen and capacity for those chips is not being added.