Filed Under: Tech

Tesla, Ford, Apple grapple with a chip shortage. Experts question if demand is overblown.

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The chip shortage isn’t done wreaking havoc on major companies. It’s the reason Tesla said in this week’s earnings report that the company won’t be making any new models this year, again delaying the much-anticipated Cybertruck.

And Tesla has fared better than most in the auto industry. The chip shortage has cost the global industry hundreds of billions of dollars in revenue so far. It’s also led to a shortage of everything from gaming consoles to smartphones.

As predicted, the chip shortage continues to plague companies in 2022. While they clamor to get hands on little semiconductors, the brainpower behind all electronics, a problem is brewing on the ordering side and experts are worried it could soon boil over.

With demand far outpacing supply, companies and governments are spending billions to build out manufacturing capacity. But the demand may not be as real as it seems.

“This is a phenomenon that’s known as double ordering,” Bernstein Senior Analyst and semiconductor specialist Stacy Rasgon explained in an interview with Straight Arrow News. “So demand is really, really, really strong and so people are buying everything. We actually don’t know how much of those parts are actually going into end products. We don’t know how many of them are going on the shelf. Of all of these orders that are driving lead times, we don’t know how many of them are real and how many of them are phantom.”

With chip orders taking so long to deliver, Rasgon said companies are placing more orders than they actually need.

“We saw this actually in our own lives with the toilet paper situation like a year ago,” Rasgon said.

Ah, yes, the toilet paper fiasco of 2020, where families bought way more than they needed and store shelves sat empty for weeks. Except with semiconductors, companies can’t just stockpile, since chips are made for specific products.

When supply does catch up to demand, there could be a stack of chips left on the table. And investors are starting to question if the semiconductor bubble could burst.

SIMONE DEL ROSARIO: IT’S THE REASON TESLA SAYS THEY CAN’T MAKE ANY NEW MODELS THIS YEAR. NO CYBERTRUCK, NO AFFORDABLE COMPACT CAR.

IT’S WHY DRIVERS ARE PAYING AN ARM AND A LEG FOR THE VEHICLES THAT ARE AVAILABLE. AND WHY CAR MANUFACTURERS LIKE FORD ARE IN THE DRIVER’S SEAT, DECIDING WHAT THEY CAN AFFORD TO MAKE AND WHAT CAN WAIT.

I’M TALKING ABOUT THE CHIP SHORTAGE – A NEAR-2-YEAR PROBLEM THAT’S COST THE AUTO INDUSTRY HUNDREDS OF BILLIONS OF DOLLARS IN REVENUE AND LED TO A SHORTAGE OF EVERYTHING FROM GAMING CONSOLES TO SMARTPHONES.

WE’VE TOLD YOU ALL ABOUT IT BEFORE AND LIKE PREDICTED, THE PROBLEM CONTINUES TO PLAGUE COMMERCE IN 2022.

BUT WHILE COMPANIES CLAMOR TO GET HANDS ON THESE LITTLE SEMICONDUCTORS, THE BRAINPOWER BEHIND ELECTRONICS, A PROBLEM IS BREWING ON THE ORDERING SIDE, AND EXPERTS ARE WORRIED IT WILL SOON BOIL OVER.

WITH DEMAND FAR OUTPACING SUPPLY, WE’RE SEEING COMPANIES AND GOVERNMENTS SPEND BILLIONS TO BUILD OUT MANUFACTURING CAPACITY. BUT THE DEMAND MAY NOT BE AS REAL AS IT SEEMS.

STACY RASGON: This is a phenomenon that’s known as double ordering. And so demand is really, really, really strong. And so people are buying everything, we actually don’t know how much of those parts are actually going into end products. We don’t know how many of them are going on the shelf. Of all of these orders that are driving lead times, we don’t know how many of them are real and how many of them are phantom. 

SIMONE DEL ROSARIO: WITH IT TAKING SO LONG TO GET CHIPS, STACY RASGON SAYS COMPANIES ARE PLACING MORE ORDERS THAN THEY ACTUALLY NEED.

STACY RASGON:  we saw this actually in our own lives with the toilet paper situation like a year ago. 

SIMONE DEL ROSARIO: WHICH MEANS WHEN SUPPLY CATCHES UP TO DEMAND, WE COULD BE LEAVING A LOT OF CHIPS ON THE TABLE. AND THE SEMICONDUCTOR BUBBLE COULD BURST. I’M SIMONE DEL ROSARIO. FROM NEW YORK IT’S JUST BUSINESS.

The chip shortage isn’t done wreaking havoc on major companies. It’s the reason Tesla said in this week’s earnings report that the company won’t be making any new models this year, again delaying the much-anticipated Cybertruck.

And Tesla has fared better than most in the auto industry. The chip shortage has cost the global industry hundreds of billions of dollars in revenue so far. It’s also led to a shortage of everything from gaming consoles to smartphones.

As predicted, the chip shortage continues to plague companies in 2022. While they clamor to get hands on little semiconductors, the brainpower behind all electronics, a problem is brewing on the ordering side and experts are worried it could soon boil over.

With demand far outpacing supply, companies and governments are spending billions to build out manufacturing capacity. But the demand may not be as real as it seems.

“This is a phenomenon that’s known as double ordering,” Bernstein Senior Analyst and semiconductor specialist Stacy Rasgon explained in an interview with Straight Arrow News. “So demand is really, really, really strong and so people are buying everything. We actually don’t know how much of those parts are actually going into end products. We don’t know how many of them are going on the shelf. Of all of these orders that are driving lead times, we don’t know how many of them are real and how many of them are phantom.”

With chip orders taking so long to deliver, Rasgon said companies are placing more orders than they actually need.

“We saw this actually in our own lives with the toilet paper situation like a year ago,” Rasgon said.

Ah, yes, the toilet paper fiasco of 2020, where families bought way more than they needed and store shelves sat empty for weeks. Except with semiconductors, companies can’t just stockpile, since chips are made for specific products.

When supply does catch up to demand, there could be a stack of chips left on the table. And investors are starting to question if the semiconductor bubble could burst.

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