Chip Inventories Swell as Consumers Buy Fewer Gadgets

The world is now awash in chips. The oversupply marks a sharp turnaround from a global shortage during two years of supercharged demand. From a report: Consumer appetite for electronics has weakened against a backdrop of rising interest rates, a falling stock market and recession fears. Chip inventories are swelling, mirroring what is happening in the wider economy where retailers are stuck with goods on their shelves and producers of a range of products in high demand early in the pandemic now face a glut. What is happening in chips amounts to good news for consumers who can get their hands on products from washing machines to laptops faster, and sometimes more cheaply, than a year ago. For chip makers, the shift has triggered a wave of job cuts and reduction in capital spending as companies try to restore profitability levels that have eroded in recent months.

Chip inventory levels are 'well above our target level,' said Sanjay Mehrotra, chief executive of memory maker Micron as the company on Thursday missed Wall Street earnings projections, gave a subdued outlook and said it would cut about 10% of its workforce. Lead times between chip orders and deliveries that swelled early in the pandemic have fallen in recent months, according to an analysis by Susquehanna International Group. Inventory levels, typically measured in days, are at their highest levels in more than a decade, or about 40 days above the median for the chip industry and its supply chain, according to a UBS analysis. Much of what is playing out for chip makers is illustrated by the reversal in fortunes that gadget makers have experienced over recent months. HP and Dell, two of the largest PC makers, say their products that flew off the shelves early in the pandemic now are sitting there for longer.

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