Drop in Chip Price Suggests Recession is Worse than Expected

JP Morgan Chase recently released a report showing that semiconductor giants such as Micron and STMicroelectronics are seeking to sell at significantly lower prices due to serious product inventory backlogs. Nvidia Corp. and others are postponing their launch because similar products are lagging and dropping in price in the market.

Several major products that were previously in severe shortage, such as wafers, triodes, driver wafers, DRAM, NAND, and GDUs, have seen 20% to 80% price cuts while triggering a major drop in the share prices of semiconductor companies.

Chips have been classified as a commodity by the capital market as they have become no less important than energy in today’s economy. The price drop and slow sales of chips indicate that a recession has arrived.

Media outlets reported that Samsung, the world’s leading electronics company, has had a growing parts inventory backlog worth up to $36.8 billion since the beginning of the year. Samsung notified suppliers as early as the first quarter that it would stop purchasing spare parts by the end of July, thus triggering the latest round of plunging U.S. stocks.The U.S. is the most important consumer market, with consumption accounting for nearly 70% of US GDP. And for the first time, the U.S. retail sales in May showed negative growth, and when inflation is taken into account, the retail decline has been very serious. It is worth noting that shopping consumption only accounts for 40% of total consumption, and if we then calculate the decline in services therein, the data is even more ugly.