Global chip inventory worryingly high, says Gartner

Th industry may be lurching towards a newsupply chaincrisis, according to market-watchers at Gartner, who today indicated that current semiconductor inventory levels are "worrisome ... given current conditions". Recent forecasts that both business and consumer IT spending will be much lowe

Th industry may be lurching towards a new supply chain crisis, according to market-watchers at Gartner, who today indicated that current semiconductor inventory levels are "worrisome ... given current conditions".

Recent forecasts that both business and consumer IT spending will be much lower than expected appear to have caught the components sector napping, according to Gartner senior research analyst Gerald Van Hoy.

"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," he said.

Principal analyst Peter Middleton said that although excess levels buffered the impact of the Japanese earthquake action must now be taken to rationalise stock levels.

"The inventory correction comes at a time when ASPs are tracking below trend levels, with overcapacity in the foundry space expected to prolong this weakness," said Middleton.

Gartner said its Index of Inventory Semiconductor Supplu-chain Tracking (GIISST) remained at caution levels, with days of inventory at 1.12 in Q3. Anything above 1.10 indicates inflated levels that will likely cause downward price pressure.

Analysts are now predicting that the industry will begin a moderate correction at the end of the current calendar year, which will lower demand for production in the second half of 2011 and early 2012.

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