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Tim Culpan

There’s a Glut Brewing in a $161 Billion Slice of the Chip Sector

Accounting for almost 30% of the global market, memory semiconductors are facing oversupply and falling prices.

It’s a super-specialized sector.

It’s a super-specialized sector.

Photographer: Krisztian Bocsi/Bloomberg

A crucial part of the semiconductor sector will likely be hit by an oversupply next year, pushing prices down and highlighting the vagaries of an industry that’s now facing a debilitating shortage of other components. That may mean falling earnings for some companies, but likely won’t make your new car arrive any sooner.

Prices of DRAM, the most ubiquitous of chips, will likely fall 15% in 2022 after buyers stocked their shelves this year to cope with global supply chain snarls. These semiconductors play a crucial role in all electronics by temporarily holding information used by a system’s processor. But they’re also a commodity product, making the market susceptible to even minor swings in the supply-demand balance — and that’s what we’re likely to see over the coming 12 months, according to industry researcher TrendForce Corp.