Why semiconductor supply may be improving

Supply chains have received massive amounts of attention ever since the pandemic took hold. But of all the product-specific supply chains in the limelight, semiconductors have been the main attraction. They're at center stage largely because semiconductors are indispensable to the manufacturing of numerous consumer technologies, from coffee makers to car stereos to smartphones. Because they've been so difficult to come by for years now, this has led to production disruptions for a litany of industries.

But there are encouraging signs that semiconductor availability is improving — and just in time for the holiday season, when tech items are on many wish lists.

The highly popular Sony PlayStation 5 is expected to be on more store shelves as retailers gear up for the all-important holiday shopping extravaganza. During an earnings call, Hiroki Totoki, executive deputy president at Sony Group Corporation, said that the company was able to produce 6.5 million PS5 units during the second quarter, vastly more than the company expected when it revised its output estimates for the year in May.

At the time, Totoki noted that it would reduce its output total for the gaming units to 18 million for 2022 as a whole because of the toll lockdown measures had on the economy in China, where Sony sources many of the materials it needs to manufacture its merchandise.

"If the question is whether we can meet the demand, I think we're still short somewhat," Totoki said during a May 10 earnings call, as reported by Supply Chain Dive.

However, thanks to better-than-expected supply levels of the parts required to assemble the gaming consoles, Totoki said Sony should be able to produce more than 18 million units after all.

"In the second quarter 6.5 million units, we are able to produce that amount, and sales of the PS5 have been according to the plan," Totoki said in a Nov. 1 earnings call, according to Supply Chain Dive. "And therefore, for the production, we are able to have a more speedy production."

Gaming consoles like PlayStation and Xbox are heavily reliant on semiconductors.

Demand for semiconductors has tapered
What's helped to shore up semiconductor inventory is a slowdown in semiconductor sales. In September, sales for semiconductors fell 3% compared to 12 months earlier and 0.5% from August, according to the Semiconductor Industry Association.

Sales have also dwindled globally, which may be a function of inflation. Totaling $141 billion during the third quarter, sales were down 3% from the same three-month period in 2021 and by 6.3% from the second quarter.

Sony PlayStation 5 has been the must-have item for children and adults alike since the console was originally introduced in November 2020, due largely to the remarkably realistic gameplay the system boasts and compatibility with ultra-high-definition TVs. But a pre-existing semiconductor shortage has hamstrung production ever since the units first went on sale.

Totoki said demand for the PS5 remains robust, taking less than 18 hours for the company to sell out the 100,000 units that were available for sale in September. He expects demand to continue heading into 2023 and is confident the company will be able to meet it.

Added supply of semiconductors may be why.