A sudden drop in chip demand triggers fears of a possible industry downturn. Worries about an industry downturn have also led to a decline in chip shares.

Chip demand fell due to several factors, including high inflation, China’s COVID-19 lockdown, and the ongoing war in Ukraine.

The decline is forcing several chip companies to cut production to balance their forecasts for the year. Micron, one of the largest manufacturers in the semiconductor industry, said it would cut production.

Experts noted that the big chip turnaround has been uneven across all business segments. Tristan Gerra, Baird’s senior analyst for semiconductors, said that the big consumer electronics chipmakers will be the hardest hit by the downturn.

One of the main reasons why the chip industry could suffer a downturn is the decision by some chip manufacturers to stockpile computer chips during the pandemic.

Gerra said that Nvidia, the design chip giant whose graphics chips are used in games and crypto mining, could see “another shoe drop” as prices continue to fall as a result of the crash in the crypto market.

Companies least affected by the industry downturn include Apple suppliers and chipmakers that supply automobiles and data centers.

The sources for this piece include an article in Reuters.