Better days ahead for semis, says IHS

Semiconductor inventory is expected to decline by half a percent, in Q1, says IHS iSuppli.

Days of inventory held by IC manufacturers were 84.1 in Q4 – an 11 year high – in Q1 this is expected to drop to 83.7 because of an increase in demand.

Q4 revenue fell 2.8% compared to Q4 2010 leaving manufacturers with excess stock.

“The fourth quarter of 2011 proved disappointing from both a revenue as well as earnings standpoint,” said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. “Global semiconductor revenue declined by 2.8 percent compared to the fourth quarter of 2010 as customer orders declined. Meanwhile, semiconductor suppliers struggled to balance their factory utilization levels against the drop in demand, leading to the rise in semiconductor inventories.”

Semiconductor inventories in the fourth quarter of 2011 were at their highest level since the first quarter of 2001. Excess inventory can represent a challenge for the semiconductor, particularly in times of declining demand, causing prices to decline and resulting in factories reducing their manufacturing.

“Semiconductor suppliers are projecting a resumption of demand in the first quarter,” says IHS’ Sharon Stiefel, “book-to-bill ratios are reaching parity, and global macroeconomic indicators point to a healthier outlook, raising optimism among semiconductor suppliers that better days are ahead for the industry.”

Semiconductor suppliers pointed to improved bookings in January following the apparent end to customer inventory corrections.

“Should semiconductor demand rise more than projected, those companies holding excess inventory could turn that to their advantage later in 2012, because they will be in a better inventory position than those that have become too lean,” says Stiefel.

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