Chip shortages persist while some sectors face the burden of oversupply

Article by Gadjo Sevilla | Jan 25, 2023

The news: Chip delivery times remain lengthy as component shortages continue. Meanwhile, chip inventories in certain markets are exceeding demand, per the Taipei Times.

No end in sight: The chip shortage was expected to turn the corner in late 2022 and early 2023, but global scarcity was compounded by geopolitical strife.

Chip delivery times increased to 25.8 weeks in December, up six days from the previous month, per the Susquehanna Financial Group.
Automotive chipmakers are sold out until 2024, per Ars Technica, resulting in manufacturers like Toyota limiting vehicle orders.
“Lead times for nearly every product category witnessed all-time highs, with power management and MCUs [microcontrollers] leading the charge,” said Chris Rolland, analyst for Susquehanna.

The supply chain is out of whack: The lack of diversification and slow adjustments in the chip sector are taking their toll and could lead to a period of imbalance for supply chains.

Rising interest rates, recession fears, and shrinking demand for PCs and consumer electronics are leading to overstocked chip inventories.
While the automotive sector faces shortages, PC and smartphone chips are in danger of oversupply mostly due to the slowdown in consumer spending.
Chip manufacturers are rushing to hedge their bets for anticipated demand by diversifying future plant locations.
TSMC is building chip factories in the US, Japan, and Europe while investing 1.86 trillion New Taiwan dollars ($60.4 billion) in a new Taiwanese factory.

A year too late: None of these new chip factories is expected to contribute to global supplies until they go online in 2024. Until then, supply chain scarcity will continue drive up product pricing.

Expect shortages in the automotive industry to continue to boost vehicle prices and cause delivery delays.
Automakers sold 13.9 million cars, trucks, SUVs, and vans in 2022, per Repairer Driven News, the lowest sales number since 2011, when the economy was recovering from the Great Recession.