Business Maverick: Chip producers’ pandemic boom turns to bust with recession looming

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Even in an industry famous for its roller-coaster cycles, chipmakers are bracing for a particularly severe shift in coming months, when a record-setting sales surge is threatening to give way to the worst decline in a decade or more.

The semiconductor market enjoyed a massive run-up in orders during the pandemic, sending sales and stock prices to new highs and triggering a global scramble to find enough supplies. There was hope in some circles that the boom could be sustained for several more years without a painful pullback, but chipmakers are now facing a familiar problem: growing inventory and shrinking demand.

The treachery of the semiconductor cycle was driven home when President Joe Biden signed the $52-billion Chips and Science Act to subsidise domestic production – on the very day that Micron, the US’s biggest producer of memory chips, told investors demand was fading. Personal computer makers, some of the biggest buyers of chips, were the harbinger of darker times. Desktop processor shipments dropped to their lowest level in nearly three decades in the second quarter, according to Mercury Research. Total processor shipments experienced their largest year-over-year falloff since about 1984.It’s a painful hangover following pandemic lockdowns, when the work-from-home trend spurred demand for PCs and other devices.

 

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