Research firm sounds alarm on chip inventories

Global semiconductor inventories have surged to the highest level in two-and-a-half-years to just about where they were before the onset of the last chip downturn, market researcher IHS iSuppli warned on Wednesday.

The high inventories will become a big concern if chip sales growth slows down.

"If growth is lower, the high inventories could cause oversupply in the market, causing chip prices to decline faster than normal," wrote Sharon Stiefel, chip analyst at IHS iSuppli, in the report. "This could amplify the size and duration of a downturn or slowdown in the semiconductor market," she said.

Chip downturns and the resulting declines in chip prices hurt companies but are good for consumers, since chips are often the most expensive part of a gadget.

IHS iSuppli, which tracks global chip inventories as a way to determine when the boom-bust cycle of the industry is reaching its peaks and valleys, said in a report that chip suppliers held 83.6 days of inventory at the end of last year, the highest level since the second quarter of 2008, when inventories hit 84 days and marked a peak before the market fell. In general, the chip industry peaks when inventory days rise above 80 and bottoms when inventory days drop below 70, according to IHS iSuppli figures.

"Inventory levels arguably now are high by any standard," Stiefel wrote. "The sharp increase of semiconductor inventory during the fourth quarter defied expectations of a decline for the period."

IHS iSuppli predicts chip industry revenue will grow 5.6 percent this year. Last year, chip revenue grew a whopping 31.8 percent as companies rebuilt inventories decimated by global economic turbulence in 2009 and as consumers snapped up more smartphones, tablets and other gadgets.

The global chip industry has been plagued by a regular boom-bust cycle caused in part by the massive investment needed for new chip factories. State-of-the-art chip factories cost billions of dollars, and most companies invest in new factories at the same time. Often those plants come online around the same time, resulting in a glut of new supply.

But since companies have borrowed so much money to build the new factories, they cannot simply mothball production lines and wait for the glut to ease. They have to sell as many chips as possible to keep cash coming in so they can repay the loans.

A glut of DRAM sent prices of the important memory chips spiralling last year. DRAMeXchange, which runs an online clearinghouse for the chips, believes DRAM prices finally bottomed in early February after posting a 50 percent decline in the fourth quarter.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags Samsung ElectronicsComponentsintel

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Dan Nystedt

IDG News Service
Show Comments

Cool Tech

Breitling Superocean Heritage Chronographe 44

Learn more >

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?