Original title: From shortage to surplus chip market is getting colder
Two years ago, the supply chain of the chip industry was disrupted due to the epidemic, and prices soared.
Today, there is a mismatch between supply and demand.
So Nvidia can’t sell, Qualcomm is busy cutting orders, Samsung clears inventory, and smaller chip companies are even disappearing.
And against the backdrop of the growing risk of a global recession, the chip market may cool more rapidly.
Nvidia can't sell
For Nvidia, this fiscal quarter has been somewhat "core" cool.
On August 24, local time, Nvidia released its second quarter financial report for fiscal 2023.
Revenue for the quarter was $6.7 billion, down 72% from the same period a year ago, down 59% from the previous quarter, and well below expectations released in May.
The lower performance was related to weaker gaming revenue.
According to the financial report, Nvidia’s game revenue in the second quarter was US$2.04 billion, a year-on-year decrease of 33%, a decline that exceeded the company’s own expectations.
The sharp decline in gaming revenue was due to a drop in sales of gaming products, which are mainly graphics cards used in computers.
Nvidia CEO Jen-Hsun Huang confirmed months of speculation that the company had made too many graphics cards and was now forced to sell them at lower prices, Jen-Hsun Huang said, "We found ourselves with excess inventory, we The strategy is to sell well below the current level of sales in the market in order to give the channel a chance to correct."
Regarding chip production and company development, a reporter from Beijing Business Daily contacted Nvidia, but has not received a reply as of press time.
Nvidia has previously said that the impact of the macroeconomic downturn will continue, and the company has taken action with game partners to adjust channel prices and inventory.
This means that the product is likely to be marked down, which will affect the company's profit margins, which in turn will have a depressing effect on Nvidia's stock price.
At the beginning of the outbreak of the new crown pneumonia in early 2020, the trend of working from home drove a sharp increase in the product prices of a group of graphics card and server chip manufacturers led by Nvidia, which also contributed to Nvidia’s 61% revenue growth in fiscal 2022.
Now, after the earnings report was released, Nvidia’s stock price fell 5%.
Nvidia stock has fallen more than 42% since the start of the year.
It is worth noting that the impact of the cryptocurrency downturn on Nvidia's performance cannot be underestimated.
Since NVIDIA's graphics cards can be used for cryptocurrency "mining", the global "mining tide" in recent years is an important driver of NVIDIA's "hard to find a card".
Some institutions predict that the number of graphics cards used for "mining" in the world exceeds 20 million.
But as the world tightens regulations on "mining" and the cryptocurrency market cools rapidly, the demand for graphics cards in this area is also shrinking rapidly.
Chip market "avalanche"
In this chip cold wave, Nvidia is just a microcosm.
Nvidia's competitors, chip manufacturers AMD and Intel, also lowered their annual performance expectations in their financial reports released last week.
Among them, Intel's performance is even more unsatisfactory. In the second quarter, its revenue was 15% lower than the market's previous expectations, and the profits of its data center chip business almost disappeared.
Although AMD delivered a report that beat expectations, it also said it was cautious about the outlook because of "the potential for a high-single-digit decline in device sales, including PCs," during the year.
Samsung Electronics also revealed during its latest second-quarter earnings report that chip demand is further weakening, and it is expected that demand for mobile and PC chips will continue to cool, which in turn will affect demand for memory chips.
Meanwhile, video games are also going through a downturn.
Previously, the financial reports released by a number of game giants, including Sony, Microsoft, and Nintendo, also showed a sharp decline in revenue.
Game publishing giants Electronic Arts and Activision Blizzard have previously released financial reports also showing that net bookings in the second quarter fell year-on-year.
Communication expert Xiang Ligang said that since last year, a variety of reasons have caused a global shortage of chips, but this shortage is not caused by a huge increase in global chip demand or a huge impact on chip production, but a human factor. The resulting sluggish supply and demand, so it is not surprising that the current chip shortage has turned into a surplus.
On the other hand, Xiang Ligang pointed out that some chips also have a shelf life.
Some chips are not used for a long time and are hoarded in the warehouse, which is likely to reduce performance and affect quality.
The performance of chip modules is also constantly improving, and older chips may face the impact and replacement of new chips, so chips generally cannot be hoarded for a long time.
The market returns to rationality
In fact, the trend of declining demand in the chip market has been going on for some time.
Analysts generally pointed out that Nvidia's performance warning further highlights the squeeze on the entire industry in the current economic situation.
Mainly, factors such as lower consumer spending, rising inflation and a reduction in working from home have all contributed to the downturn in sales of PCs and game consoles.
The largest downstream demand for chips is consumer electronics, the most important of which is mobile phones.
Xiang Ligang pointed out that due to the impact of the new crown pneumonia epidemic, the consumer demand of the global electronic information industry has not been booming in recent years, but declined.
According to statistics, the global shipments of traditional mobile phone and personal computer electronic products are slowing down or even declining.
In general, the demand for chips for telecom products has not seen a large-scale increase, and the lack of demand is a notable fact.
Under the sluggish demand, the global mobile chip giant Qualcomm is going through the action of cutting orders. At present, it has reduced its flagship mobile chip Snapdragon 8 series orders by about 15%, and will cut the price of the two flagship mobile chips by about 40% by the end of the year.
Qualcomm CEO Anmon revealed that the decline in sales of low-cost mobile phones was the most obvious.
Qualcomm predicted in its earnings report that global smartphone sales this year are expected to decline by 5% year-on-year.
IDC, a well-known consulting firm, expects smartphone shipments to drop by 3.1% this year.
And as the risk of economic recession continues to intensify, future chip sales are hardly optimistic.
In its latest report on Monday, the World Semiconductor Trade Statistics Organization (WSTS) lowered its forecast for chip sales growth this year to 13.9% from 16.3% previously, and expects chip sales to grow by only 4.6% in 2023, the fastest rate since 2019. minimum growth rate.
In contrast, the global semiconductor chip sales growth rate in 2021 will be as high as 26.2%.
From shortage to surplus of chips, Xiang Ligang said that after 1-2 years of adjustment, the rhythm of the broken global chip supply chain will gradually be adjusted and enter a normal production state.
In terms of price, Xiang Ligang believes that chip speculators hoarded chips in the early stage, occupying a lot of funds. These chips cannot be digested by speculators producing their own products, and must be sold in the market.
These speculators are extremely sensitive to the market and always pay attention to market trends. As long as the price collapses and a large number of shipments occur, they must sell the chips as soon as possible, and withdraw funds in time to reduce losses.
As a result, chip prices can collapse quickly whenever the market fluctuates.
Beijing Business Daily reporter Tao Feng Zhao Tianshu
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