Semiconductor inventories in good shape, key to 2010 recovery
ISuppli's research indicates that inventory levels among distributors are well below the historical average.
By Suzanne Deffree, Managing Editor, News -- EDN, January 21, 2010
Semiconductor inventories remain healthy, despite claims of bloated stockpiles at distributors, according to a recent report from iSuppli Corp. And that’s excellent news, as the market research company believes proper inventory management will be a key to a 2010 growth recovery.
“Concerns have been raised that a semiconductor inventory bubble appeared among distributors starting in the third quarter of 2009 that potentially could impact the expected recovery of the chip industry in 2010,” said Carlo Ciriello, an analyst with iSuppli, in a statement. “However, iSuppli sees no evidence to support the claim that semiconductor inventories at distributors were higher in the third quarter of 2009 than they were at the onset of the downturn in the third quarter of 2008. In fact, iSuppli’s research indicates that inventory levels among these companies are well below the historical average.”
By iSuppli’s count, distributors controlled 36.9 DOI (days of inventory) at the end of Q3, down 15% from 43.4 DOI for Q3 2008. In dollar terms, distributors held $4.8 billion worth of semiconductor inventory at the conclusion of Q3, down 22% from $6.1 billion for Q3 2008. According to the market research company, these reductions meant distributor DOI at the end of Q3 were 17% less than the trailing three-year average.
ISuppli currently forecasts a small rise in inventory dollars in Q4 2009, and DOI at distributors should continue to decline. ISuppli’s preliminary estimate for the end of Q4 puts DOI at 18.7% less than the three-year historical average.
ISuppli noted that the decline in distributor semiconductor inventories parallels that of the stockpile reductions among chip suppliers. DOI at semiconductor makers declined to 66.4 at the end of Q3, down 11% from 74.6 for the same time in 2008, the company’s data showed.
“Semiconductor suppliers have been maintaining tight control over inventories,” Ciriello said. “Suppliers prefer just-in-time fulfillment to capital-constraining shelf stocking. This has resulted in lower inventories throughout the electronics supply chain, including at distributors.”
Beyond semiconductor suppliers and distributors, iSuppli said chip inventories remain at low levels for most other segments of the electronics supply chain. Semiconductor DOI in Q4 were at lower than historical levels for makers of PCs, storage devices, and cell phones. This means that any increase in demand for such end products is likely to translate directly into rising semiconductor sales, iSuppli explained.
As has been well noted by electronics supply chain experts, iSuppli pointed out that management of semiconductor inventories was a major factor spurring the recovery of the chip business in the second half of 2009. The company believes lean inventory levels will be key to driving the semiconductor market’s return to growth in 2010 after a decline of 12.4% in 2009. Worldwide semiconductor revenue is set to rise by 15.4% in 2010, iSuppli predicted.
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I question your sources, we are a small cm and are seeing shortages and very long lead times across the board for semiconductors.
Terry Weygant - 2010-25-1 13:35:00 PST
