Several Tech Companies Were Down Today, Why Was That?

To understand what’s going on with the tech industry, we need a little lesson regarding recent history.

Global semiconductors (or chips, as many opt to call them) are essential for many tech-based gadgets. In a way, there’s no way that such devices can pull off their respective functions without a proper semiconductor attached to them. 

That being said, the industry has been going through somewhat of a rough patch for the last couple of months since the world is currently suffering from a global semiconductor shortage. 

Luckily, tech companies have not stayed calm about the entire ordeal. Instead, they’ve shifted to full gear to manufacture enough chips to end this shortage once and for all. But with that, we might be entering into yet another problem.

A mass buy could actually bring down overcapacity issues

Earlier today, Dutch machinist ASML Holding was working heavily towards building enough chips to compensate for the shortage. They predict that their efforts could bring down a boom in business, sprawling over the next four years at a minimum.

With that knowledge, long-time customers such as Intel, Taiwan Semiconductor Manufacturing, Samsung and Nvidia have prioritized expanding their respective chip capacities by buying as many chips as they can out of ASML.

When considering the current situation, it all makes sense. Doesn’t it?

Well, here’s the issue, if ASML’s efforts are successful, the chip shortage could end sooner than expected. But if that were to happen at the same time that they’ve made it a priority to mass produce, this could lead to a new issue that happens to be the complete opposite.

That’s right, this all could lead to overcapacity. Ironic, isn’t it? If left unchecked, all of these companies that just bought entire shipments could eventually see a significant amount of these chips being unused. For most purposes, that’s a financial loss. 

Even men of influence in the industry, like Elon Musk, have talked about this problem. Which only gives yet more validity to our worries.

As expected, many inventors responded to this by selling their stocks as quickly as possible. Unfortunately, if this occurs, an overcapacity issue is more complicated to deal with than a shortage. So things might play a little different for the tech industry in the coming days.

 But for now, the only thing we can do is wait and see.