iSuppli warns of chip inventory tsunami

iSuppli predicts that excess chip inventories will triple by the end of Q4 because demand is falling at a much faster pace than anticipated.

The amount of excess chips waiting to be placed inside gadgets is likely to triple in the final three months of this year because demand is falling at a much faster pace than anticipated, iSuppli said Tuesday.

"This [inventory] rise is having a deleterious impact on semiconductor pricing, revenue and profitability, and could delay the semiconductor industry's recovery from the current downturn -- even when demand rebounds," the market research firm said in a statement.

iSuppli predicts the amount of excess semiconductors in the electronics supply chain could balloon to more than US$10.4 billion by the end of the fourth quarter, up from $3.8 billion at the end of the third quarter.

By comparison, excess inventory at the beginning of the dot-com bust was $13.4 billion, iSuppli said.

iSuppli issued a red alert on semiconductor inventory levels due to the fourth quarter rise, a first for the company.

The inventory report came on the same day Gartner revealed a dour forecast for semiconductor industry revenue next year. The researcher expects global chip revenue to decline 16.3 percent year-over-year in 2009 to $219.2 billion. Last week, Gartner lowered its chip industry revenue forecast for this year to a 4.4 percent drop.

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