Is the chip shortage over?

Hi, it’s Ian. The chip shortage is still with us—sort of. But first...Today’s must-reads:• The amount of time US audiences spent watching on [View in browser]( [Bloomberg]( Hi, it’s Ian. The chip shortage is still with us—sort of. But first... Today’s must-reads: • The amount of time US audiences spent watching online TV surpassed cable [for the first time ever]( • Elon Musk says [Twitter is hounding him]( over his chats about the buyout • The [billionaires’ case]( against building more housing Don’t celebrate yet Bad news for chipmakers is generally good news for customers: In their earnings reports this season, Intel Corp., Nvidia Corp. and Micron Technology Inc. gave forecasts that indicate chip supply is outrunning demand. The implication—that a supply glut could be looming—is potentially dire for the companies. But finally, it seemed, customers who had been struggling to get enough silicon, and not pay dearly for it, would get some relief. Unfortunately for both customers and chipmakers, the reality is more complicated. The chip companies that are struggling with the buildup of unused stockpiles and falling orders are primarily concentrated in one area: the PC industry. In the pandemic, the rise in remote work sent demand for personal computers skyward. Now, people are returning to offices and schools, and deciding they don’t need that fourth home laptop. Meanwhile, the customers that aren’t looking to buy PC chips are still struggling. Cisco Systems Inc., the maker of machinery that basically runs the internet, said it still can’t get enough components to meet demand. Like many others, Cisco is suffering shortages of a lot of types of chips, including ones that may perform relatively simple functions but are nonetheless essential to complex devices such as network switches or routers. Older types of chips, like power convertors, are made in factories that have long since ceased to be state of the art. Because of the industry’s fascination with producing chips using hyper-advanced technology in facilities that cost as much as $20 billion, there’s been very little investment in expanding capacity of older, less complex manufacturing. Cisco forecast that the issues will persist through its fiscal 2023, which ends in July next year. Scott Herren, Cisco’s chief financial officer, said his hope is that factory space freed up by less production of PC parts will be devoted to making more of what he needs, but that will take time to play out. Chip stocks have [taken a dive recently]( on supply glut fears. But it’s worth nothing that not everyone is hurting. Analog Devices Inc., a maker of chips used in vehicles and industrial machinery, said its backlog of orders is still growing. Prices for its products are stable, it said. This is from a company whose worst quarter this year featured 72% revenue growth. Other companies, like NXP Semiconductors NV and STMicroelectronics NV, are seeing strong demand as well. Their results suggest the chip industry is no longer as reliant on PC and smartphone growth to stay healthy. Semiconductors are used in so many products these days—cars, factory equipment, appliances—that chipmakers have an extra cushion. Still, that’s not placating investors who react to the slightest mention of a slowdown. Even after Analog Devices gave a better-than-expected forecast—saying it was conservative, at that—[the stock fell]( 5% on Wednesday. A chip glut may well be coming, but for much of the industry it's not here yet. Applied Materials, the biggest maker of machines that manufacture chips, said Thursday that it’s still receiving more orders than it can fill—because it can’t get enough chips itself. That situation is going to persist for several more quarters, Chief Executive Officer Gary Dickerson told us. This raises the question, if the maker of chipmaking equipment can’t get enough chips, what chance do others have? —[Ian King](mailto:ianking@bloomberg.net) The big story The once high-flying travel startup Pollen collapsed, leaving a trail of complaints. The company planned star-studded vacations in posh locales and said Covid was responsible for cancellations; employees [say executives are to blame too](. What else you need to know Qualcomm is plotting a return to the server market [with a new chip](. Neobanks are struggling to make good on their [lofty promises](. The CEO who fired 900 people over Zoom told [Bloomberg TV](, “We did a lot of things that were very wrong.” Join Bloomberg Live in London for the [Bloomberg Technology Summit]( on Sept. 28 to see Europe’s business leaders, policy makers, entrepreneurs and investors explain how they’re adapting to this new environment—and discuss solution-based strategies. 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