$8 billion in excess chip inventory still clogs supply chain, says report
Research firm cuts forecast to 28% decline in semiconductor sales this year
Semiconductor Business News
(08/13/01 08:58 a.m. EST)
EL SEGUNDO, Calif.--Despite worldwide efforts to reduce chip inventories in the current downturn, the industry's supply chain is still awash with too many semiconductors--about $8 billion in excess inventory, based on new estimates released today by iSuppi Corp. here.
The new iSuppli Market Intelligence Report concludes that improvement in supply channels has been slower than expected, causing average selling prices continue to drop while fab utilization declines. Consequentially, the market research firm is slashing its 2001 forecast for semiconductor sales.
"While there is a modicum of good news for the personal computer, computing platform and wireless market segments with replenishment ordering for components beginning, we are revising our forecast for worldwide semiconductor revenue this year downward to $147 billion -- an annual decline of 28%," said Greg Sheppard, vice president for market intelligence services.
"We see the market decline hitting bottom in the third quarter with a further 2% downward move for revenues from the previous period, with revenue growth up 4% from this low level in the last quarter of the year, thanks largely to a traditional seasonal boost from consumer purchases toward the end of the year," he added. "The reason for this gloomy forecast is quite clear -- $8 billion in excess inventories continue to put a damper on unit ordering and prices.
"More than three-fourths of this inventory resides on the shelves at semiconductor suppliers and Electronics Manufacturing Services (EMS) providers," Sheppard said.
He said 60% of the excess inventory held by contract systems manufacturers was in the networking and telecom sector "despite heavy write-downs by the leaders in this marketplace." Sheppard warned that this hangover "could well last until the second half of 2002 when capital spending upgrades and major infrastructure build-outs in China finally are expected to kick in."
"We expect commodity semiconductor prices to hit bottom this quarter or next and linger there until the spring of next year," Sheppard added. "Component buyers should begin locking in long-term price contracts by the end of the year to take full advantage of the underlying glut of inventory and foundry capacity that is driving this trend." |
