A brand new report from Jon Peddie Analysis (JPR) exhibits large year-over-year development throughout the PC market, however it comes with a warning. The report asserts that the huge demand for computing merchandise will taper off, and over-reactions from semiconductor suppliers may depart the market with a lot of chips with out a dwelling.
The pandemic introduced large demand for computer systems — specifically, laptops. The report exhibits a 49% improve in laptop computer gross sales year-to-year, which is the best single-year development on report. In Q1 2021 alone, there have been greater than 89 million pocket book shipments, which is an all-time excessive. To handle this demand, semiconductor executives like Intel’s Pat Gelsinger have promised to ramp up manufacturing over the subsequent few years, however Jon Peddie, President of JPR, says that’s a dangerous proposition.
“The danger is that semiconductor suppliers will likely be lured into over-reaction and consider that out of the blue 100s of hundreds of thousands of recent customers have appeared and the demand will keep excessive,” Peddie wrote. “That’s not solely not real looking, it’s additionally not true — the place are they coming from — not this planet?”
The affect of this overcompensation isn’t simply spare chips readily available. It may point out an impending market crash. Semiconductor producer TSMC, in addition to Nvidia, AMD, and MediaTek, have hit all-time excessive inventory costs all through 2020 and 2021. Intel has seen large development, too, although its present inventory spike continues to be barely beneath a enhance it noticed in 2000.
Market analysts say these shares are vastly overvalued in the mean time, and a huge purpose why is cryptocurrency mining. Crypto mining has made firms like Nvidia very worthwhile throughout 2020. We’ve been right here earlier than. In 2014 and 2018, the GPU market skilled crashes after the worth of Bitcoin tapered off. This naturally impacted the inventory market, and Nvidia noticed greater than a 50% dip in its inventory worth.
The distinction this time is scale. In 2018, Nvidia dropped from a share worth of round $280 to a low of $130. Solely a few years later, Nvidia’s inventory is buying and selling for as a lot as $700. Equally, TSMC was buying and selling at round $45 in March 2020. Now, the inventory trades nearer to $120.
We could have been right here with cryptocurrency demand, however we haven’t been right here with cryptocurrency demand compounded by a pandemic. JPR famous a 38.74% improve year-over-year within the GPU market, which is probably going defined by elevated cryptocurrency mining demand. Whenever you mix that with the never-before-seen development of the laptop computer market, the danger of overcompensation begins to turn out to be clear.
Given how clearly worthwhile the elevated demand has made chip suppliers, we most likely gained’t see a light-touch method in the case of chip provide. It’s essential to rebuild provide chains, however a giant drop-off in demand may spell catastrophe for the semiconductor business.