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March 22, 2022, 3:27 p.m. EDT

Two ways the semiconductor shortage may play out

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By Daniel Newman

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Demand from all areas

The second scenario is one that I could see as the worst case for chipmakers, tech and the economy as a whole — however, it would likely be temporary. This scenario would most likely play out if the Ukraine war is prolonged, inflation remains high despite the Fed’s actions. That would mean high gas prices, food prices and supply shortages keeping prices for chips and finished goods high despite a prolonged contraction in the economy.

In this case, I still see chipmakers struggling to keep up with the demand as companies spend on software, automation, security, connectivity and cloud to streamline business operations. However, the likely pullbacks would be in some consumer-discretionary goods powered by chips like premium-tier smartphones, laptops and gaming consoles. 

Depending on the severity and length of the recession, coupled with the sustained demand for technology, it is hard to see this lasting long. A continued recessionary environment would most likely push the Fed to become more accommodative. The recent track record of policymakers indicates another stimulus could be pumped into the economy, again spinning up the demand cycle for chips. 

I remain confident that chip demand will stay strong as everything we use, from cell phones to crypto mining to smart homes, continues to see greater chip density to accommodate our insatiable thirst for greater productivity, intelligence and connectivity. 

Add the continued impact of world events from Covid to the current war. We see continued risks to the supply chain, such as temporary factory shutdowns in the East or raw-material shortfalls like neon gas and palladium in eastern Europe can potentially further dent the delicate semiconductor supply chain. 

Companies including Intel, TSMC, Micron, Samsung and GlobalFoundries that build manufacturing capacity in the U.S. and Europe remain critical. Further support from policymakers is imperative. Any glut would likely be temporary, while the potential risks of future shortfalls continue to be significant. 

Chipmaker rundown 

My near-term favorites: Nvidia /zigman2/quotes/200467500/composite NVDA +0.92% , AMD /zigman2/quotes/208144392/composite AMD +1.49% , Marvell /zigman2/quotes/200053236/composite MRVL +0.50% , Qualcomm /zigman2/quotes/206679220/composite QCOM +1.53%

“Sleepers”: Lattice /zigman2/quotes/204117531/composite LSCC +1.87% , Micron /zigman2/quotes/205710729/composite MU -0.20% , GlobalFoundries /zigman2/quotes/230483311/composite GFS +1.83%

Longer-term (two-plus years): Intel /zigman2/quotes/203649727/composite INTC -1.14% , Taiwan Semiconductor /zigman2/quotes/204359850/composite TSM +0.50% .

Daniel Newman is the principal analyst at Futurum Research, which provides or has provided research, analysis, advising or consulting to Nvidia, Marvell, Intel, Qualcomm, Lattice, Micron, Samsung Semiconductor and dozens of other companies. Neither he nor his firm holds any equity positions in companies cited. Follow him on Twitter @danielnewmanUV.

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$ 133.30
+1.21 +0.92%
Volume: 45.67M
Oct. 6, 2022 1:24p
P/E Ratio
43.45
Dividend Yield
0.12%
Market Cap
$328.90 billion
Rev. per Employee
$1.32M
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/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 68.95
+1.01 +1.49%
Volume: 66.49M
Oct. 6, 2022 1:24p
P/E Ratio
28.84
Dividend Yield
N/A
Market Cap
$109.68 billion
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$1.39M
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/zigman2/quotes/200053236/composite
US : U.S.: Nasdaq
$ 48.54
+0.24 +0.50%
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Oct. 6, 2022 1:24p
P/E Ratio
N/A
Dividend Yield
0.50%
Market Cap
$41.23 billion
Rev. per Employee
$820,036
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/zigman2/quotes/206679220/composite
US : U.S.: Nasdaq
$ 126.80
+1.91 +1.53%
Volume: 3.05M
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P/E Ratio
11.22
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2.37%
Market Cap
$140.25 billion
Rev. per Employee
$936,467
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/zigman2/quotes/204117531/composite
US : U.S.: Nasdaq
$ 56.03
+1.03 +1.87%
Volume: 548,764
Oct. 6, 2022 1:24p
P/E Ratio
58.03
Dividend Yield
N/A
Market Cap
$7.55 billion
Rev. per Employee
$684,104
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/zigman2/quotes/205710729/composite
US : U.S.: Nasdaq
$ 54.62
-0.11 -0.20%
Volume: 9.69M
Oct. 6, 2022 1:24p
P/E Ratio
7.04
Dividend Yield
0.79%
Market Cap
$60.38 billion
Rev. per Employee
$715,302
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/zigman2/quotes/230483311/composite
US : U.S.: Nasdaq
$ 53.99
+0.97 +1.83%
Volume: 648,098
Oct. 6, 2022 1:24p
P/E Ratio
59.84
Dividend Yield
N/A
Market Cap
$28.62 billion
Rev. per Employee
$512,329
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/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 27.33
-0.32 -1.14%
Volume: 17.05M
Oct. 6, 2022 1:24p
P/E Ratio
5.84
Dividend Yield
5.36%
Market Cap
$113.49 billion
Rev. per Employee
$606,061
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/zigman2/quotes/204359850/composite
US : U.S.: NYSE
$ 74.85
+0.37 +0.50%
Volume: 5.63M
Oct. 6, 2022 1:24p
P/E Ratio
14.41
Dividend Yield
1.95%
Market Cap
$365.42 billion
Rev. per Employee
$1.02M
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