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Semiconductor inventory levels fall

by Scott Bicheno on 5 October 2009, 12:03

Tags: Gartner (NYSE:IT)

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On the mend

Market researcher Gartner today revealed that the semiconductor industry continued to shed inventory in the third quarter of 2009, but that inventory levels will not stabilise until 2010.

Using what it calls the DASI index, Gartner has calculated that inventory levels are still on the inflated side, but are headed in the right direction. Inflated inventories mean companies are likely to try to shift existing stock before buying new stuff. A pick-up in demand can only be expected once inventories return to ‘normal' levels.

"While some industries are experiencing a fundamental demand-side recovery, other industries are benefiting from a reduction in inventory simply because of their continued conservative efforts in keeping the supply chain lean," said Gerald Van Hoy, senior research analyst at Gartner.

"Concerns of possible shortages in inventory seem to be premature, but inventory should continue to be monitored, especially in large-scale markets, such as PCs and cellular phones.

"Even though revenue has been showing positive growth, there is not enough of it to overcome the declines we saw at the beginning of 2009, and we do not see indications of this changing before the end of the year. Nevertheless, the industry continues to shed inventory, which has made the current crisis manageable."

Van Hoy concluded on a note of cautious optimism, observing that there are important differences between this one and the one that followed the bursting of the dotcom bubble.

"The decrease in demand has been severe, yet the response in absolute inventory levels has been more in tune with the change in demand," he said. "In the current situation, we see a very different pattern of response and inventory management, with the percentage differences between revenue and inventory much tighter than during the crisis in 2001 and 2002."


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