New research spells further bad news for semiconductor sales

1 12 2011

New research from Gartner Inc suggests that a forthcoming inventory correction process in the electronics manufacturing industry will continue to affect sales prospects negatively for the rest of 2011.

However, it is also widely hoped that 2012 will see an upturn in this regard once the market begins to stabilise.

This news follows a suggestion by leading market analyst IHs iSuppli that component inventories held by semiconductor suppliers during the second quarter of this year increased to levels not seen since the start of the last downturn in 2008.

At the end of June this year, official semiconductor stockpiles with suppliers stood at 83.4 days of inventory (DOI).

This exceeds the previous record of 83.1 DOI from the first quarter of 2008.

IHS iSuppli claims the news is “raising concerns over the near-term outlook for the chip market.”

The level is 11% higher than the historical average which is usually recorded for this period. The last major oversupply, seen in the first quarter of 2008, signalled the beginning of a 2 year downturn in the semiconductor industry.

Sharon Stiefel, semiconductor analyst at IHS, voiced her fears over what this could mean for the entire semiconductor industry.

“For the semiconductor industry, wading into such troubling territory – reminiscent of the dark days leading into the recession – could herald the beginning of a critical inventory adjustment period.

“The correction is likely to take place during the next few quarters and will not be completed until mid-2012. As such, it will involve suppliers making a prolonged reduction in their inventory levels to avoid dangerous oversupply situations.”

In total, this represented a 2 year high and just goes to show that excessive inventory is not always a negative thing necessarily.

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