Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.
IC Inventory At ‘Alarmingly High Levels’, says IHS
Chip inventory held by semiconductor suppliers reached alarmingly high levels in Q3, says IHS, amid weak market conditions.
In Q4, semiconductor revenue declined by 0.7% sequentially after inventory reached exceedingly high levels by the end of Q3 – amounting to 49.3% of total semiconductor revenue – higher than at any time since Q1 2006.
Chip stockpiles among semiconductor suppliers had actually gone down during the final two quarters of 2011, but then inventories steadily ticked up again, reaching 47.5% of total revenue in Q2 before hitting the current peak Q3 – the latest time for which full figures are available.
The inventory level being measured refers to chip stockpiles specifically in the hands of semiconductor suppliers, not to inventory throughout the electronics supply chain.
Chip level at the supplier level is then compared against combined revenue from a sample of 75 semiconductor supplier companies excluding memory, which is tracked separately because of that market’s typical late results.
A low inventory-to-revenue ratio is preferable, given that higher levels indicate not only unsold stockpiles but also unrealized revenue tied up with the stagnant inventory.
”The uncomfortably high level of inventory among semiconductor manufacturers of nearly all stripes is a result of key demand drivers failing to materialize,” says IHS’ Sharon Stiefel, “demand for semiconductor devices has typically come from new products that consumers feel compelled to purchase. But going into the holiday season last year, no such new products marshalled enough impetus to overcome consumer fears about lingering economic woes. Two months prior to Christmas, consumer purchases of electronics had grown by only 0.7%, the worst performance since 2008.”
Also contributing to depressed conditions was the poor performance of the industry’s data processing segment, traditionally the largest user of semiconductors. In fact, mobile PCs were projected to decline in 2012 when final figures are tallied, toppled from dominance by media tablets.
Ultrabooks and other ultrathin PCs, meanwhile, did not produce the demand for semiconductors originally expected as the year progressed.
Despite the collective rise in inventory stockpiles, some semiconductor segments performed better than others with smartphones and tablets taking the place of traditional PCs among consumers and eroding PC market share.
Q1 2013 is expected to bring growth in the industrial and automotive electronics segments. Other semiconductor markets, are expected to rebound in Q2 and Q3.
‘If global economic forecasts perform according to positive expectations, semiconductor revenue could grow by 4% percent in Q2,’ says IHS, ‘however, if demand evaporates, semiconductor suppliers will find themselves in a deplorable oversupply situation.’Tags: consumer fears, demand drivers, electronics supply, semiconductor manufacturers, semiconductor supplier