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Massive drop in demand for chips incoming?

Chip shortages have recently constrained the production of a large number of companies. Is the period of high demand now coming to an end?

We have covered chips in many of our previous articles. Mostly, however, it has been that there is a severe shortage of them and companies have had to cut back on production.

Now we are gradually seeing more warnings from chip manufacturers that demand is slowly falling off. And even some of the world’s largest chipmakers, Samsung Electronics and Advanced Micro Devices (AMD) are reporting this.

Abstract technology background, microchip

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Samsung, the world’s largest memory chip maker, reported a 32% drop in operating income, while its competitor AMD said it was wrong by about $1 billion in its earlier sales forecast.

Another giant, Taiwan Semiconductor Manufacturing, reported a roughly 48% increase in quarterly sales to about NT$613 billion ($19.4 billion), on top of their earlier forecast. Part of the reason for this is that it is the world’s most advanced chipmaker. Of course, it depends on what we can expect in the period ahead.

Weaker demand from end users

Of course, many chips are used in consumer electronics. In the current situation of the high cost of living due to high food and energy prices, end-user demand for new electronics is declining.

The situation is even more challenging for manufacturers as the production costs of new products are rising significantly. High energy prices make production itself more expensive, adding to the cost of materials and transport.

Government restrictions on exports are not helping either

The semiconductor industry is also grappling with export restrictions from the US government, which is ratcheting up pressure on its allies to impede shipments of high-end chips to a growing list of Chinese companies as it seeks to keep the Asian country in check.

This has further hampered chipmakers from AMD to Nvidia, which are not allowed to import their high-performance chips into China because of fear. Fear that these chips will be used in advanced Chinese weapons systems.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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