Todd Burke, president of global business development at electronic components distributor Smith, reviews the conclusions of the company’s 2024 Preview Market Intelligence Report on the semiconductor industry.
In the beginning of 2023, the semiconductor industry was still in “shortage” mode, Burke notes. Things are different today. With a few exceptions, he says, “Everyone is sitting on excess inventory right now.”
It seems like only yesterday that the automotive industry was begging for microchips, having ceded its allocation in the early days of the COVID-19 pandemic, only to be caught with insufficient supply when consumer demand unexpectedly surged. Now, however, demand for electric vehicles, which depend heavily on those materials for their control systems, has plummeted, and “EVs are piling up on lots across the nation.”
Faring even worse due to the current oversupply is the consumer electronics sector, which has been negatively impacted by rising prices, Burke says.
What’s happening today in the semiconductor industry is another in an endless series of cycles of shortage and glut, Burke says. Each was driven by a different kind of technological innovation — past examples include the iPhone, the emergence of EVs and the latest processor from Intel — but they shared the end result of creating wide swings in supply. In its 40 years in the business, Smith counts at least 26 shortages, all for different reasons, he says.
So, did semiconductor manufacturers move too fast during the pandemic-inspired shortage in announcing a series of new chip-fabrication plants, especially within the U.S.? Such projects require billions of dollars of investment and years to build. Burke says those actions are part of a long-term strategy to reduce U.S. dependence on supplies from China and Taiwan, as well as meet future demand. “It will absolutely play out over time,” he says, adding that the current inventory glut will likely shrink around the end of this year. Twenty twenty-five “could be a very interesting year for the semiconductor space,” he says.
