Semiconductor Companies Cut Jobs | PYMNTS.com

Declining consumer demand for electronics has left semiconductor firms with an oversupply of chips.

And as a result, those companies cut staff and reduced capital spending, the Wall Street Journal (WSJ) reported Tuesday (Dec. 27).

Micron Technology CEO Sanjay Mehrotra said last week that chip inventory levels were “well above our target level,” as his company — which missed earnings forecasts — announced. That it will cut about 10 percent of its workforce.

After increasing during the pandemic, the lead time between chip orders and delivery has decreased in recent months, the WSJ report said, citing an analysis by Susquehanna International Group. A separate UBS study found that inventory levels were at their highest level in more than a decade, about 40 days longer than the average for the chip sector.

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That’s a starkly different scenario than semiconductor companies and electronics manufacturers faced earlier this year. March saw the industry turn to Congress for help as chip inventory levels fell.

A January report by the U.S. Department of Commerce on semiconductor supply chain risks showed that the median inventory companies held has dropped from 40 days in 2019 to less than five last year.

Intel CEO Patrick Gelsinger told the Senate Committee on Commerce, Science and Transportation that “digital transformation has fueled unprecedented demand for chips, exacerbated by the COVID pandemic and global disruptions to our supply chains.” gone.” “The chip shortage cost the U.S. economy $240 billion last year. We now expect the shortage to continue through at least 2024.

In the months since, rising inflation has forced consumers to cut back on non-essential purchases. PYMNTS research shows that Americans spend less on consumer electronics, toys and games, and appliances in favor of basic items like food, fuel, and a roof over their heads.

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And a report from Mastercard found that spending on electronics during the holiday shopping season dropped a little more than 5% from last year. The numbers follow spending data from the Commerce Department that showed sales of electronics and appliances fell 1.5 percent in November.

Meanwhile, chip shortages remain a problem in the auto industry, as PYMNTS noted last week. A report by the Financial Times included interviews with automakers and chip suppliers who said the growing use of connected car functions and demand for electric vehicles will extend the industry’s drought by 2023.

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Among those issuing the warning was Onsimi CEO Hassane Al Khoury, who said his firm had already sold out of silicon carbide chips used in electric cars at least until the end of next year due to demand. have done.

“There is nothing you can do now to change 2023,” Al Khoury said. “We will add capacity every quarter, every month in 2023 to meet our customers’ demand.”

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