Gartner Said Semiconductor Industry would be worrisome

Published:2011/9/21 3:00:00 Author:Phyllis From:SeekIC

According to Gartner, semiconductor days of inventory (DOI) are forecast to plateau in the third quarter of 2011 at worrisome levels given current conditions and it seems consumer and business spending will be weaker than expected. The market research firm expects the semiconductor industry to begin an inventory correction in late 2011.

Analyst of Gartner said the chip industry entered the third quarter with moderately high levels of inventory. The present levels are too high given the weakening economic sentiment that the industry must rein in production growth and take action to reduce accumulated inventory. These actions are expected to occur during the next few quarters with production and sell-through expected to return roughly to balance by the second quarter of 2012.

Gartner also said the industry will undergo a moderate inventory correction during the next few quarters, which will lower demand for semiconductor production in the second half of 2011 and early 2012. Though the proportion of total semiconductor inventory held by OEMs has begun to rise, it is still near historic lows, which will help reduce the impact of an order correction on semiconductor vendor sales.

The conclusions are supported by its Gartner Index of Inventory Semiconductor Supply-chain Tracking (GIISST), which remains at caution levels with days of DOI at 1.12 in the third quarter. Within the GIISST, an above DOI level of 1.10 indicates inventories are inflated, and there will likely be downward pressure on average selling prices. Below the 0.95 level indicates inventories are low, components may be on allocation and double ordering begins, according to the firm.

Gartner notes that the excess inventory comes at a time when average selling prices are tracking below trend levels, with foundries seeing over capacity.

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