The Boise, Idaho-based company is the latest to reveal just how quickly demand for electronic components is declining, following a warning by Nvidia Corp. on Monday and weak reports by Intel Corp. and other chipmakers this earnings season. The majority of the pain is being felt by companies that make chips for personal computers. Consumer demand for those devices is drying up rapidly as pandemic lockdowns end and household budgets are hammered by inflation.
Highlighting the speed with which demand is evaporating, Micron said orders deteriorated since the company last gave an update just over a month ago. Crucially, it’s not just PC makers that are cutting back.
“Compared to our last earnings call, we see further weakening in demand because of adjustments broadening outside of just consumers to other parts of the market including data centers, industrial and automotive,” Chief Executive Officer Sanjay Mehrotra said in an interview with Bloomberg Television.
The prospects for the chip industry are dimming on a day that was supposed to herald a renaissance in semiconductor manufacturing in the US with President Joe Biden signing the Chips and Science Act. That $52 billion stimulus package is designed to make it cheaper for companies to build domestic factories and help counteract the loss of the crucial skill set to Asia. Shortages during the pandemic inspired US and European politicians to prioritize the creation of additional plants locally to create a more robust supply chain.
The chip sector has always been highly cyclical and nothing has happened to change that fact. The pattern of behaviour has repeated in several cycles. The cyclicality is driven by how capital intensive the sector is.Click HERE to subscribe to Fuller Treacy Money Back to top