Inventories in the PC and consumer electronics market could reach a turning point. Gavin Baker, a partner at investment firm Atreides Management, wrote an infographic on Twitter stock history analysis since the beginning of the COVID-19 pandemic.
As a result, we see that some segments of the technology industry are still struggling with stock levels below pre-pandemic levels. However, in the PC and consumer electronics segments there is an increase in inventories, with existing inventories now reaching 29% larger volumes for the PC segment and 55% more for consumer electronics.
The pandemic demonstrated the impact of black swan-like events following the sudden explosion of consumer demand for electronics as a worldwide policy of working from home and isolation was implemented. Combined with the boom in server requirements for AI and HPC workloads, manufacturers ’on-demand estimates have proven to be very inaccurate. This led to a number of problems in the industries as there just wasn’t enough product to go around.
Evidence of stock levels in the final semiconductor market. Grow everywhere. If there are long lead times, there will be buffer stocks and double order. pic.twitter.com/572kU4fyDwFebruary 2, 2022
Rising prices for the best graphics cards; supply restrictions on state-of-the-art consoles; requirements for equipment with increasing cryptocurrency; all these elements have been agreed in price increases in all directions for PC enthusiasts. The effect of the toss-up was that the companies focused primarily on delivering the highest-yielding goods. The lack of Ryzen 3 processors in the AMD 5000 Series portfolio is a landmark, as is the late introduction of the lower RX 6500 and RTX 3050 cards.
We are already seeing the effects of increasing inventory as video cards, for example, have become increasingly available. Inventory data paint a picture where the most pressing consumer demand has been met. There are still users who may need and want new products, but apparently do not want to buy them at current inflated prices.
Demand and supply tend to be cyclical, and it may well be that companies will accumulate more products than they can actually sell, which could lead to oversaturation of supplies in the future. All companies want to avoid this situation, which means that they are likely to soon have to start lowering prices to take into account the rest of the demand.
However, it may also be the case that suppliers are moving from their “just in time” accumulation model (if they are trying to keep in stock as close as possible to projected product demand) to the “just in case” model. This would mean that companies would be willing to take the risk of increasing supply so that possible jumps in demand were not as costly as what happened during the pandemic.
Whatever the end result, increasing inventory is good news for consumers and should mean that the prices and availability of PC hardware will improve. After spending the last couple of years watching big hardware companies make record profits as demand exceeds supply, at least it will be interesting to see what happens next.