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September 21, 2011

Semiconductor inventory levels are a worry: Gartner

Inventory correction expected to begin in late 2011

By CBR Staff Writer

Semiconductor days of inventory (DOI) are forecast to be at worrisome levels in the third quarter of 2011, as consumer and business spending is likely to be weaker than expected, according to Gartner.

Gartner said the semiconductor industry is expected to begin an inventory correction in late 2011.

Gartner senior research analyst Gerald Van Hoy said the semiconductor industry entered the third quarter of 2011 with moderately high levels of inventory."Current levels are too high given the weakening economic sentiment, and the industry must rein in production growth and take action to reduce accumulated inventory," Hoy said.

"We expect that these actions will occur during the next few quarters with production and sell-through expected to return roughly to balance by the second quarter of 2012."

Gartner principal analyst Peter Middleton said the inventory correction comes at a time when average selling prices (ASPs) are tracking below trend levels, with over capacity in the foundry space expected to prolong this weakness."Excess inventory levels helped buffer the impact of the Japanese earthquake; however, now action should be taken to rationalise stock levels in the face of macroeconomic weakness," Middleton said.

The demand for semiconductor production in the second half of 2011 and early 2012 will come down due to a moderate inventory correction during the next few quarters, Gartner said.

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