The return of GPUs on sale may be tech world's monkey's paw of 2022
Improved supply is welcome – too bad it may be the harbinger of a cooling economy
Comment Have you seen this yet? Shelves full of shiny new graphics cards in gleaming defiance to the shortages that plagued the past many months?
On the surface, it might be a glimmer of hope that the world is slowly returning to normal, that supply-demand imbalances are being sorted. But let's look closer at that beautiful bounty of boards and how it may reflect changes in the global economy.
If you're in the market for a GPU and don't care what it means on the macroeconomic scale, godspeed, you're certain to get a good deal. But the larger concern is that the sudden glut of GPUs is less a function of vastly improving manufacturing capacity, and more a sign that the worldwide chip shortage is abating due to cooling consumer demand.
— Jessie Lawrence (he/him) (@hitstreak) June 18, 2022
And sure, one could make the argument that the GPU glut is an isolated incident, purely the result of the crypto winter that has miners unloading graphics cards by the dozens and no longer snapping them all up.
But that would ignore the crypto crash's connections to the stock market downturn, broader economic trends, and the growing signs that there's an improving supply of not just GPUs but other kinds of chips because people are curtailing their spending due to inflation, personal budgets, and other economic concerns.
This morning, for instance, Taiwan's TrendForce said contract chip manufacturers "have seen a wave of order cancellations" for components due to lower demand for things like PCs, smartphones, and TVs. The research firm estimates this will lower the collective utilization rate of these chip factories to 90 to 95 percent in the second half of the year after a long period of demand outstripping capacity. While this wave of cancellations is more concentrated on commodity parts, TrendForce expects utilization to "decline marginally" for leading-edge chips, such as high-end CPUs, GPUs, and ASICs.
The report came out less than a week after DigiTimes foreshadowed this broader wave of cancellations and reported that America's Apple, AMD, and Nvidia are reducing orders for chips made on leading-edge nodes as dense as 5nm from Taiwanese foundry giant TSMC.
Micron Technology, a major US-based memory chip supplier, is also adjusting its production capacity due to lower demand. Last week, the company said it will reduce investments on wafer fab equipment and focus on selling chips out of inventory next year after lowering its sales forecasts for PC- and smartphone-related products for 2022. In an earnings call, Micron CEO Sanjay Mehrotra referred to this as "curtailing our supply growth" to create a greater "supply-demand balance."
There are other signs of that semiconductor supplies are improving due to a slowing economy. In South Korea, which is the largest producer of memory chips, the nationwide inventory of those electronics increased by 53.4 percent in May, which Bloomberg said was the largest jump since a similar one that preceded a slowdown in memory chip sales in 2018.
Intel, AMD, and Nvidia have given public warnings, too, about declining demand for consumer products that use their chips, which is why we're starting to see things like retail displays full of CPUs and GPUs. It's why Intel reportedly plans to lower prices for Alder Lake chips soon.
Big Tech has rallied around the semiconductor industry, particularly in the US, to advocate for an expansion in die manufacturing capacity to fight against future shortages, improve national security, and make the global supply chain more resilient in the face of geopolitical concerns.
However, tech companies were likely hoping that the global chip shortage would subside because of improved production capacity, and not because the global economy is flirting with a recession and the market filled with hardware no one wants to buy or can afford. It might be the industry's monkey's paw of 2022 and beyond. ®