Apple vendor warns of ‘excessive chip inventory’ – No, really

Macbook Air

Macbook Air
Photo: Michelle Ehrhardt/Gizmodo

“Excessive chip inventory” are three words I didn’t expect to write any time soon, yet the world’s largest contract chip vendor is predicting this seemingly unlikely scenario. TSMC said in an earnings call on Thursday that while its net profit hit record highs (up 76.4% year-on-year), slowing demand for PCs, smartphones and other consumer segments has led to “excess inventory in the semiconductor supply chain”. .” The chipmaker predicts that it will take “a few quarters” before things rebalance.

On the smartphone and PC front, the drop in demand follows two years of lockdowns and remote working, a period during which consumers were eager to upgrade or buy new gadgets they relied on. would support. Now that home offices are fully equipped, the demand has disappeared. Another culprit for chip supply shortages, crypto mining, has imploded in recent months as crypto stocks continue their bottomless free fall. At the same time, geopolitical tensions and soaring inflation are adding to uncertainty. TSMC isn’t the only company sounding the alarm: Micron last month warned of declining demand for consumer products.

“Our suppliers have faced greater challenges in supply chains, which are extending tool delivery times for our advanced and mature nodes,” said CC Wei, CEO of TSMC.

To be clear, the chip shortage is far from over. While inventory of high-end chips found in modern consumer gadgets is increasing, demand in other market segments, including data center and automotive, has remained steady. Supply for these areas is tight and TSMC needs to reallocate resources to accommodate such constant demand. It may not be enough, as the chipmaker puts it, consumer needs will continue to exceed “our ability to supply.”

TSMC says demand for cutting-edge 5nm and 7nm chip technologies will help sustain its business through the end of this year. Apple’s next iPhone could play a major role: TSMC is the Cupertino giant’s sole chip supplier and is responsible for manufacturing its custom silicon, including the new M2 processor Macbook Pro and Macbook Air. TSMC also supplies fabless semiconductors to Qualcomm, Nvidia, AMD, and MediaTek, among others.

“Let me now turn to TSMC’s long-term growth outlook. While macro headwinds bring short-term uncertainties that may linger, we believe the fundamental structural growth trajectory of semiconductor demand at term remains firmly in place,” Wei said.