The corrective action will bring the DOI level in the semiconductor supply chain under control
The anticipated semiconductor inventory correction by vendors is expected to dampen sales prospects for at least the remainder of the year, according to IT research firm Gartner.
Gartner says the corrective action will help bring the days of inventory (DOI) level in the semiconductor supply chain under control, as the level was elevated going into the third quarter of 2011.
Gartner principal research analyst Peter Middleton said they expect that average selling prices (ASPs) for foundry-produced components will be under pressure through the first half of 2012 because of aggressive investment in capacity made as the industry came out of the last recession.
"That investment is leading to excess capacity at the same time as concern is rising about end-market demand levels due to weak economic prospects," Middleton said.
The current level stood at 1.16 in the third quarter of 2011, up from 1.12 in the IT research firm’s initial 3Q11 update in September, according to Gartner’s Index of Inventory Semiconductor Supply-chain Tracking (GIISST).
A DOI level of 1.10 within the GIISST indicates that inventories are inflated and downward pressure on ASPs are expected, whereas below the 0.95 level indicates that inventories are low, components may be on allocation, and double ordering begins.
Gartner senior research analyst Gerald van Hoy said the proportion of total semiconductor inventory held by original equipment manufacturers (OEMs) has begun to rise.
"However, it is still near historic lows, which will help reduce the impact of an order correction on semiconductor vendor sales," van Hoy said.