China, as a large chip manufacturing powerhouse, has seen a substantial plunge on smart chip prices amid declining demand at consumer markets in 2022.

A semiconductor chip of STMicroelectronics was once in short supply last year as a core component for electronic control systems, with its market price surging up to around 3,500 yuan (around $520). While now its price per unit has dropped to around 600 yuan. 

Another type of smart chip product sells only at 20 yuan this year, only a tenth of its price a year ago.

"The price of luminous chips have fallen back about 20 to 30 percent year on year, and the price drop range for driver chips can be larger at around 40 percent," said Xiao Yansong, board secretariat of an LED manufacturer.

Moreover, the consumer electronics control chip market prices have also continued to fall this year, from the high point of over 100 yuan to two-digit prices. The global sale decline of smart phones this year caused the cooling chip market, reducing the demand for processors.

Ma Xuerong, general manager of a Shanghai-based electronic science and technology company, told China Media Group (CMG) that "there surely are canceled orders, as people don't have that much demand which has caused delays on orders and deliveries or even cancellations. Now that we have oversupply, the number of orders has naturally reduced." 

Less demands

Statistics from global consulting firm Gartner showed that in the second quarter of 2022, global PC shipments fell by 12.6 percent from the same period last year, and global smartphone shipments fell 9 percent year on year.

Qualcomm, the world's leading enterprise in the field of semiconductors, software and services, canceled about 15 percent of their high-end Snapdragon 8 chips, announcing that it will lower the price by about 40 percent on its flagship mobile chip products by the end of this year.

In addition, Samsung Electronics, the world's largest information technology firm, said its sales of mobile phone chips could be weakened further in future, while the company is struggling to get rid of its stock.

High inventory

In 2021, a total of 1.15 trillion chips were shipped worldwide, as the global supply shortage of chips in the past two years led many chipmakers to ramp up production and capacity.

According to Nikkei report, based on data of nearly 2,350 chip-related listed manufacturing companies worldwide, compared with the end of 2021,  the total amount of inventory of these companies in the first quarter of 2022 saw a surge of about $97 billion, hitting a 10-year high in both inventory surplus and increment.

Zhang Monan, a research fellow at the U.S.-Europe Research Department of the China Center for International Economic Exchanges (CCIEE), said that in the past two years, big chipmakers have expanded their production wildly. However, due to global economic slowing with weakening demand, a structural oversupply followed the economic slowdown as a result.