Chips Ahoy: Manufacturers Warn of Glut

Remember when there was a shortage of microchips in the automotive industry? Pepperidge Farm remembers. According to reports, images showing fields of almost-but-not-quite completed new cars awaiting One More Chip, along with manufacturers wildly deleting features like heated seats as if they were the mob deleting computer files, could be permanently in the rear-view mirror.

Reuters is quoting tech company Mobileye Global as a group of eggheads sounding the alarm on a “pullback in orders” from some of its customers. This, described as a clearing excess inventory, could hammer the company’s financial results this year and may spark a selloff in shares of auto chip suppliers.

For anyone whose eyes glaze over al Wall Street lingo (raises hand), this essentially is a warning that a few car companies may now have more than enough chips on hand with which to build their vehicles, thus flipping the script from the past couple of years in which saw chip makers holding all the cards. Indeed, the report goes on to suggest demand from Tier 1 customers (read: big OEMs) is likely to weaken thanks to recent moves which permitted them to build up their chip stocks and avoid shortages such as the ones which stubbornly persisted through the 2021 and 2022 calendar years.

Naturally, TTAC takes something of a jaundiced view here, pointing out that any company issuing financial warnings just four days into the new year could very well simply be hedging their bets and intentionally setting low expectations for investors. At the very least, it is likely a recognition that the party is over in terms of chip suppliers hosing OEMs for all they’re worth. Making outsized profits for the past few years is likely to skew The Numbers now that some sense of normalcy has returned to this industry.

Which is, of course, exactly what companies like Mobileye are predicting for their own balance sheets this year.

"As supply chain concerns have eased, we expect that our customers will use the vast majority of this excess inventory in the first quarter of the year," spox for the company mused, pointing out they expect Q1 revenue to fall about 50% compared to this time 12 months ago.

[Image: MZinchenko/Shutterstock]

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from TheTruthAboutCars https://www.thetruthaboutcars.com/cars/news-blog/chips-ahoy-manufacturers-warn-of-glut-44504431?utm_medium=auto&utm_source=rss&utm_campaign=all_full