A Slump In Demand Follows The "Chip Shortage"
The semiconductor industry is used to cycles of booms and bust. As such, after a chip shortage that affected manufacturers at a global scale, the chip industry is now anticipating sluggish sales going forward.
- The industry is experiencing a severe decline in sales of personal computers and smartphones, and concerns are growing over the demand for chips
- In addition, the U.S. government is enforcing new restrictions that go beyond earlier export prohibitions to crack down even harder on semiconductor technology sold to Chinese corporations
Even after a month of depressing news from chip manufacturers like Nvidia and Micron, analysts expect more bad news to come. The PHLX Semiconductor Index (SOX) is now down 35% for the year. This is almost twice as much of a drop as the S&P 500 has seen during that time. Since the SOX's current multiple of about 18 times profits is relatively close to the low level reached during the past 3 years, the sector may have reached its bottom. But there's a good chance that the tsunami of bad news isn't done.
PC Sales Fall Sharply
The end of 2022 saw a staggering global fall in PC sales of 19.5%, the most since Gartner started keeping track of sales in the mid-1990s. According to IDC's Worldwide Tracker, the research firm estimated the decline to be 15% year over year and matched Gartner's assessment of the factors affecting sales.
- The pandemic-induced boom in PC sales and the enormous increase in hybrid and remote work have now slowed down and are no longer contributing to computer sales
- Mikako Kitagawa, a director analyst at Gartner, stated that back-to-school PC purchases also had "disappointing results, despite massive promotions and price drops, due to a lack of need as many consumers had purchased new PCs in the last two years"
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