Global semiconductor revenue in 2011 rose by 1.9%, compared to a growth forecast of 7% issued early in 2011
Chip inventories held by semiconductor suppliers declined in the third quarter of 2011, stemming the steady expansion of the previous seven quarters, as the industry had to cut production in a bid to reduce excess supply, according to according to an IHS iSuppli Inventory Insider report.
Calculated by the days of inventory (DOI) measure, semiconductor stockpiles in the third quarter stood at 81 days, down 2.5% from 83 days in the second quarter.
The DOI level had been on the rise since the third quarter of 2009 when it stood at just 65 days, when supplies were low because production was cut down due to the recession.
However, inventory DOI since then had been growing, in order to make up for depleted stocks, and also handle the growing demand as strength returned to the supply chain, the research firm said.
It is estimated that global semiconductor revenue in 2011 rose by 1.9%, compared to a growth forecast of 7% issued early in 2011.
IHS semiconductor analyst Sharon Stiefel said for the third quarter, semiconductor suppliers began an inventory correction to alleviate an escalating oversupply situation on top of already inflated stockpiles.
"With the global economy all but stalled, and in the face of declining orders as well as decreased visibility, many semiconductor manufacturers opted to reduce capacity utilization. And with lead times now declining to normal levels after extended periods of waiting in the past, manufacturers were more confident about trimming bloated inventories this time around without fear of causing too much pain to the supply chain," Steifel added.
Despite the reduction in inventory, DOI in the third quarter remained the highest in the last 10 quarters, indicating that stockpiles are still quite high.
The percentage of excess inventory during the period rose to 12.1%, more than the 11.1% increase in oversupply during the fourth quarter of 2008. This caused expectations that inventories will be cut down further in the fourth quarter of 2012.
Among the various semiconductor sectors, inventory levels rose for handset original equipment manufacturers, distributors and analogue companies — all of which posted percentage gains in DOI.
There was reduced inventory, however, for fabless semiconductor makers, memory suppliers, foundries, PC original equipment manufacturers, storage gear companies and electronic manufacturing services providers.