The Situation With Semiconductors is Not Good: AMD, Nvidia and Intel Faced Some Problems
Aug 26, 2022
It has been confirmed by the recent second-quarter earnings season that the semiconductor manufacturers are facing difficult times. The performance reports from the three major market players, AMD, Nvidia, and Intel, were wildly inconsistent. Even if the numbers for Advanced Micro Devices were favorable, they still came far short of allaying investors' anxieties.
Despite a significant decline in personal computer sales, Advanced Micro Devices increased its revenue by 70% yearly to $6.6 billion. Strong demand from data centers has been advantageous for the organization.
However, Micron and Qualcomm both failed to convey that the sector's momentum would not be considerably diminished by the economic downturn and perhaps an impending recession.
How It Happened
The chipmakers were anticipated to see healthy sales for at least ten years. That perspective has significantly evolved.
However, research company Gartner recently revised downward its sectoral sales growth projections, practically halving them for 2022.
The current forecast is for a 7.4% increase in global semiconductor revenue to $639 billion in 2022. That percentage prediction is lower than the actual growth rate for 2021, which was 26.3%. Additionally, it is lower than the second quarter prediction that chip sales would increase 13.6% overall in 2022.
Gartner also advised forgetting about growth in 2023. The research company in Stamford, Connecticut, anticipates a 2.5% decline in overall chipmaker revenue.
"The global semiconductor sector is entering a phase of weakness that will last through 2023, when semiconductor revenue is predicted to decrease 2.5%, “according to Richard Gordon, practice vice president at Gartner, even if chip shortages are subsiding.
"In semiconductor end markets, particularly those that are dependent on consumer spending, we are already observing deterioration"Consumer disposable income is under pressure from rising energy and fuel prices, taxes, interest rates, and inflation. This is impacting spending on technological goods like PCs and cell phones.
The industry has seen high demand during the post-pandemic recovery; in fact, shortages for some types of chips still exist, while surpluses have flooded other industries.
According to Gartner, there will be declines in the personal computer and smartphone industries in 2022 (by 9.5% and 7.1%, respectively), causing Intel and AMD, in particular, to lower their projections. The demand for chips designed for computer servers is increasing (20% increase), even while demand for CPUs and DRAM memory drops.
The demand for electric battery chips continues to outpace supply. However, Micron has just lowered its projected sales for the current quarter.
Other Side of The Coin
The struggles of the semiconductor industry are best shown by Nvidia, which attributes a sizable portion of its revenue to the gaming, cryptocurrency, and metaverse businesses.
According to a news release, Nvidia was able to boost its sales in the second quarter by 3% year over year to $6.7 billion.
Nvidia, is currently experiencing a huge amount of graphics cards, the reverse of the historical trend. It still has an excessive amount of RTX 3000 graphics cards in stock. The decrease in consumer and miner demand over the previous three months is what has caused the overstock.
In an effort to get rid of them before introducing the following generation, the corporation will lower the price of such cards. The RTX 4000s, the upcoming generation of graphics cards, claim to be twice as powerful as the ones we already have.
The abrupt decrease in consumer demand was caused by global macroeconomic challenges, according to Chief Financial Officer Colette Kress's remarks to analysts on August 24.
"In order to alter channel pricing and price-position current high-end desktop GPUs as we get ready to introduce a new architecture, we created programs with our gaming channel partners. As mentioned in the previous quarter, we had anticipated a declining contribution from crypto to the market for video games."
We are managing our supply-chain transformations in a hard macro climate, but we will get through this, said Jensen Huang, the company's founder and chief executive.
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