Semiconductor industry turns around: Chip inventory increases as sales diminish

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Semiconductor industry turns around: Chip inventory increases as sales diminish

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The market for producing chips and semiconductors has turned around in recent months to the point of having too many chips to match the demand as the public buys fewer gadgets.

Semiconductors have become a surplus after two years of a global shortage worldwide, according to industry insiders. This shortage, mixed with rising interest rates and recession concerns, has led buyers to purchase fewer devices, further diminishing the market.

Chip inventory is “well above our target level,” Sanjay Mehrotra, chief executive of memory maker Micron, told the Wall Street Journal.

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Lead time between chip orders and deliveries has also diminished, according to analysis from industry groups, implying that companies can keep up with market demands.

This lack of market demand has also led to lackluster results on Wall Street. Micron missed its Wall Street earnings predictions on Thursday and said it would cut 10% of its workforce in response, as did Intel and AMD. Other computer companies, including HP and Dell, said their product is no longer selling as quickly as they had in the past.

The increased stock of semiconductors also reflects a decrease in users purchasing new computers and smartphones, according to industry estimates.

Executives in the semiconductor industry said they expect things to improve over 2023, but there is uncertainty on when the market will have its next upturn.

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The diminishing sales arrive after Congress passed legislation that invests tens of billions into new factories for constructing chip fabrication plants. The Commerce Department also implemented export controls over Chinese tech access, which will restrict their ability to buy U.S. chips and develop more advanced technology, such as artificial intelligence or quantum computing.

© 2022 Washington Examiner

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