So chip makers bracing for a particularly severe shift in the coming months, a record setting a sales surges threatening to give away to the worst decline in a decade or more. Joining us now to unpack this a little more, Ian King, Bloomberg News u S Semiconductor reporter, Ian give us a sense of the demand supply picture at the moment. Well, what we've heard from a number of companies, Paul Is,
has been pretty stark. We've had Intel, we've had in Vineer, we've had Micron and my brothers saying the demand is falling off really quickly. They've been forced to pre announce they've cut multiple billions off revenue forecasts, and most of that so far has been concentrated in the sort of computer related products. But you know, also there's concern about
what's going on in smartphones. And then Micron sort of made a little bit worse by saying, oh, it's not just this area, it's also spreading into data center another another parts of the economy feast or famine. Right, it was only a couple of months back that we were pulling our hair out because we couldn't get our hands on computer chips. Now there seems to be an abundance,
or so it would seem. Is this typical of the industry, This kind of boom bust cycling in is unfortunately absolutely typical, and we're you'll remember all of the industry executives that told us, I don't know this time was different, and but unfortunately that's not the case. I mean, we'll forgot the two thousand and nineteen is actually a down here
for the industry. And then we've had this tremendous um growth over the last couple of years, which some people, I think the more cynical ones to say maybe a lot of this is just kind of panic buying. Maybe we're we're over expending ourselves. Maybe a lot of these chips are just ending up in warehouses, and it's sort of just in case frenzy um. And right now, at least in some areas, it's looking like those that were taking that that sort of dim view of things that
were right. How valuable is it to take a much longer term view here? Though demands in the long term is only ever going to increase. Should we look past these cycles, or considering how expensive these plants are and how long they take to bring them online, and how rapidly they become obsolete. Is that sort of viewpoint not useful? I mean, there are there are a couple of ways to look at it. I think you're right. You know, the industry has only ever grown when measures over an
extended period. But the vicious ups and downs that we see in the meantime cause casualties, and those casualties are companies and they are stocks. You know, companies that were once industry leaders, that once did really well. A few time it wrong. If you bring a plant in at the wrong time, you're in big trouble. And that really hasn't changed. And that explains why there's only really three companies that are on the absolute leading edge now, and
one of those, which is Intel, is struggling. Is it fair to say that there really has been I don't want to say a lack of innovation, but we haven't had a meaningful analyst for an upgrade cycle. Evs are out there. We know that the technology is pretty much in place. I think the same could be said for
the five G infrastructure smartphones. You reference the fact that some people are saying the market is saturated earlier, right, and I'm wondering whether we just what we need is a new form of technology to drive a little bit more tech innovation as it relates to computer chips. Yeah, I mean, that's definitely representative of the one viewpoint, and
in a slightly suspicious viewpoint. The flip side of that is that the industry is arguing, Look, chips are being and are getting into more things than they've ever been in one not just dependent on smartphones and PCs. Look at these giant data centers are part of everyday life. Your washing machine now has more brains than your PC had twenty years ago kind of thing. And you know that that semi conductors are utterly pervasive, is the argument. And that may be true and is certainly more true
than it used to be. But whether that amounts to linear up into the right demand is is obviously another question, and we're seeing evidence, at least in the short term that that is not the case, and that's what causing the situation we're in. Now. What are the implications for the fifty two billion dollar Chips and Science Act that just got signed into law in the United States. Does it look like a waste of money and a potential political football now or was it a prudent investment for
the future as supply chains, but are so uncertain. Again, you know, there are no shortage of opinions on this, and they're all quite divergent. I think the concerned, the most fundamental amount of level of concern is that, look, the industry has has been you know, ups and downs aside pretty much fine tuned towards efficiency. Everything is because
it's so expensive, because it is so brutal. Everything is geared towards making as not have these giant gluts, or that the gluts are nowhere near as bad as they used to be be because we need to be more efficient.
If you throw in free money and forced geographical diversity just for the kind of sake of it, and this kind of just in case mentality, then you're going to have perhaps worse gloats is one of these arguments, so that maybe in a couple of years time, when a lot of these factories come online, then look out, if we don't have really really good demand, then we're going to have yet another DWANTA in what do we know
about input cost? I'm thinking either of silicon which is used in the manufacturing of the wafers, the neon gas that is used to etch some of those wafers. I mean, our companies dealing We talk a lot on this program about rising inflation. Are they dealing with inflated input cost Yeah, I mean, infut costs are definitely a problem, but I mean, arguably they're one of the biggest problems that they've had is shortage of chips themselves, because you know, the machinery,
which is really the most expensive part of this. You're looking at some individual machines that costs as much as two hundred million dollars in these factories. There's been a shortage of those, which is because guess what, I haven't been enough of the right type of chips to make enough of them. So that's been the biggest sort of inflated everything that's been going on for the chipmakers themselves is the short to do chips, which is a pretty
vicious irony. Right, even we've got about a minute lift, to what degree are we seeing the supply chain getting duplicated? Now? We haven't seen it so far, but we are seeing plants being created in Arizona, in Ohio in the United States and also planned in Europe. Um you know that those plants are at very early stages. At this point, they will be essentially duplicate production facilities if the demand
isn't there to meet them. But if history is a guide, the shells the actual buildings that were built, and they won't be equipped if there isn't the demand for them. So you know, we've got to see how that comes out yet. Ian, good stuff. Always a pleasure. Thanks for making time to chat with us. Ian King is semiconductor reporter. He covers the industry from our studios and bureau in San Francisco.