From Dearth To Glut: Why Theres An Oversupply Of Some Computer Chips

Do you know what supply chain issues we've been discussing for the past 2.5 years? A particularly challenging sector is chips, such as semiconductors, which power everything from your phone to your car.

Scarcity has turned into gluttony, at least for some types of chips.

At the beginning of the explosion, Stacey Rasgo's children were staying at home during the quarantine.

Brace yourself, this story sounds familiar.

"They were home from school for 18 months," Rasgon said. "I have four children, I bought four laptops. That's why I won't buy a laptop for a while.

In addition to four children, Rasgon is a senior analyst at Bernstein Research.

He explained that chips for computers and smartphones make up half of the semiconductor industry. “These are the areas where we see shortages turning into carts.

This excess is taking a toll on the memory chips used in computers and cell phones.

According to Chris Miller, an adjunct professor at Tufts University's Fletcher School and author of "The Chip War," they are similar from manufacturer to manufacturer.

“The memory chip companies don't make a big difference between these chips.

But with specialized chips used in graphics or artificial intelligence, the market rules are more complicated.

"There are different products, and different companies face different demand dynamics," Miller said.

Even in today's recession, these specialty chips are in short supply. That includes what's inside the car, said Christine Diczek, policy adviser at the Federal Reserve Bank of Detroit in Chicago.

"Demand for automotive chips hasn't really fallen off a cliff," he said. Demand for new cars is still high.

This is the silver bullet for the sector.

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