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Slipping Chip Prices Could Mean End Of Semiconductor Shortages

slipping chip prices could mean end of semiconductor shortages
slipping chip prices could mean end of semiconductor shortages

A cocktail of increased production, reduced demand and sustained capacity is bringing down the cost of graphics chips. It may also indicate the peak end of the semiconductor deficit that has been plaguing the world since the start of the COVID-19 pandemic.

Similar to declining processor prices, the reduction of graphics-chip prices depends entirely on supply and demand, according to Jack E. Gold, founder and principal analyst with J.Gold Associates, an IT advisory company in Northborough, Mass.

Graphics chip demand is diminishing in the wake of the pandemic, along with a decline in personal computer sales, as cited by TechDeft. That, along with the curtailing of crypto mining operations on graphics chips have led the demand for graphics chips to dwindle.

The future demand for Ethereum’s crypto is anticipated to slow as mining community becomes reliant on the proof-of-stake technique. The digital coin seeker utilizes considerably less scientific heavy lifting than the previous model to mine the coin.

The demand slump , as Gold explained, doesn’t mean graphics chips have become a bit out of date. It’s a regular product cycle, with particular temporary changes in supply and demand. Gold stated that the cost is much less likely to be connected to competition, considering how the industry around the world liquefies.

It can also be a sign that a new batch of chips will soon be available, and vendors are preparing their inventories. This is the time when manufacturers introduce new chips, usually for the end-of-year rush.

Insuring Capacity

The overall chip market, not just the graphics chips, is impacted by softening demand and increasing supply shortcomings. Things will stay pretty much the same in the coming months.  IDC semiconductor research specialist Shane Rau told TechDeft. The shortage is now on the power-management side.

In terms of computer graphics chips, he concluded, On the demand side of the market, if we compare this year to last year, there is a softening in the amount of PCs which people want.

On the supplier side, Nvidia and AMD have taken steps to increase their production by buying more capacity, making agreements with their wafer and packaging suppliers. They have offered to buy all the capacity they can buy to reduce the risk for suppliers when they increase capacity.

The cost of many different facets of graphics cards may be impacted by fluctuations in the relative cost of chips.

Nvidia and AMD alike may assist their board vendors obtain graphics memory, which they can buy at a reasonable price, creating a dependence. If the GPU demand slows or the prices for their cards are reduced, this could impact the demand for graphics memory and the price of the memory of the board.

It is important that customers don’t purchase GPU chips. They buy PCs with a GPU card inside or purchase the card. The card has several other components and passes through the supply chain. Each of them contributes its margins to what a purchase costs a customer. So there are many variables than GPUs in the final cost a customer pays.

That could still be to blame for the shortage in graphics-card availability. As an example, a Reuters report in August discovered that Nvidia GeForce graphics cards were remaining in significantly short supply at most merchants, including Best Buy and Newegg Commerce.

Imbalanced Chip Supply

Another sign that inventories of semiconductor chips are in the process of stabilizing is the steady increase in the value of the Gartner Index of Inventory Semiconductor Supply Chain Tracking.  (The index) is projected to improve in 1Q22, making it the third consecutive quarter of improvement, said Gartner Vice President for Semiconductors and Electronics Gaurav Gupta.

Because the GIISST fell behind in the last quarter of 4Q21, it will be entering the usual phase by the beginning of the third quarter of 3Q22, as quoted by the Tech News World.

There are still chip types that will be in short supply, such as PMIC FPGAs, enterprise-level networking chips and automotive-grade MCUs. Chips that employ 8-inch wafers will stay tight for several years, as will the shortage of 4G SoCs because of strong migration towards 5G.

There is also soft demand in consumer demand for consumer electronics, like smartphones and laptop computers, he went on. Rising costs and inflation are the main reason for this, he explained, with fuel prices rising, logistics being disrupted by continuing Covid restrictions in China and raw materials prices going up as a result of the Russia invasion of Ukraine.

We observed an imbalance in the chip supply, which has continued the present spell and now even surpassed the withdrawal rate across all chip groups. We are expecting supply normalization to begin by the second quarter of 2Q23.

Uneven Recovery

While the chip supply appears to be improving, there could possibly be some issues that could cause that recovery to be a long-term process. Whatever the microchip makers do, it is fundamental to the success of the recovery. We’ve observed in the past couple of years where the absence of sufficient production of GPUs can result in artificial shortages. That ‘s a wild card to keep an eye on.

Even if processors are offered, there still may not be enough other elements for smooth fabrication. If a maker of a computer lacks one critical part to make the whole computer, that can keep output of the whole personal computer, according to Rau.

The PC must also make it to market since it costs a lot. PCs that have discrete GPUs tend to obtain priority because they cost a lot, so they are used for flight. There are still machines at some ports in Asia and the United States that would prohibit the necessary systems from marketing in a timely manner.

According to Chinese authorities, lockdowns could impact shipments of resources. If lockdowns continue for a few weeks, they could have a detrimental impact on essential infrastructure work.

Whatever the length of the shortage, it will be an uneven recovery in demand, as a number of chips will hit full production capacity to cover market demand sooner than others. Gold added.

It will vary depending from the processing node the nodes are created below, how the market for specific electronic equipment changes, such as memory chips versus CPUs, he continued. So we’re careful about broad-brush strokes saying there is a glut or there’s no shortage.

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