News Article
Semiconductor inventory correction has started
Excess semiconductor inventories in the electronics supply chain declined significantly in the fourth quarter of 2004, marking the end of a nine-month run-up in surplus stockpiles and putting the industry on track to eliminate its chip overage in 2005, according to market analyst iSuppli.
Excess semiconductor inventories in the electronics supply chain declined significantly in the fourth quarter of 2004, marking the end of a nine-month run-up in surplus stockpiles and putting the industry on track to eliminate its chip overage in 2005, according to market analyst iSuppli.
However, with the supply chain still having $1 billion in excess chip inventories left to burn and with semiconductor sales growth slowing in 2005, the surplus remains an issue of concern to the worldwide electronics industry. Thus, iSuppli for now is maintaining the yellow alert it sounded in third quarter regarding excess chip inventories.
Excess inventories in the electronics supply chain declined to $1 billion in the fourth quarter of 2004, down 38.3% from $1.6 billion in the third quarter. ISuppli has previously forecast that excess inventories would decline more modestly to $1.5 billion in the fourth quarter.
The fourth-quarter reduction arrived after excess inventories swelled markedly during the first three quarters of 2004.
Excess chip stockpiles actually began 2004 in negative territory, with inventories $700 million short of historical averages. However, those inventories grew to a $12 million excess in the first quarter and then to $829 million in the second quarter, before peaking at $1.6 billion in the third.
The huge build-up in the third quarter was due to over-zealous chip ordering in the first half of 2004, which clogged the distribution channel in anticipation of strong end demand in the second half.
After demand failed to materialise, chip customers throughout the supply chain reassessed inventory needs in the third quarter, delaying orders and pushing parts back to suppliers. The result was a doubling in excess inventory in the third quarter.
Fortunately, the third-quarter setback took just one quarter to remedy. During the last three months of 2004, the chain burned off almost the entire surplus accumulated in the third quarter and now is on track to dispense with the remaining excess in the first half of 2005, iSuppli believes.
However, with the supply chain still having $1 billion in excess chip inventories left to burn and with semiconductor sales growth slowing in 2005, the surplus remains an issue of concern to the worldwide electronics industry. Thus, iSuppli for now is maintaining the yellow alert it sounded in third quarter regarding excess chip inventories.
Excess inventories in the electronics supply chain declined to $1 billion in the fourth quarter of 2004, down 38.3% from $1.6 billion in the third quarter. ISuppli has previously forecast that excess inventories would decline more modestly to $1.5 billion in the fourth quarter.
The fourth-quarter reduction arrived after excess inventories swelled markedly during the first three quarters of 2004.
Excess chip stockpiles actually began 2004 in negative territory, with inventories $700 million short of historical averages. However, those inventories grew to a $12 million excess in the first quarter and then to $829 million in the second quarter, before peaking at $1.6 billion in the third.
The huge build-up in the third quarter was due to over-zealous chip ordering in the first half of 2004, which clogged the distribution channel in anticipation of strong end demand in the second half.
After demand failed to materialise, chip customers throughout the supply chain reassessed inventory needs in the third quarter, delaying orders and pushing parts back to suppliers. The result was a doubling in excess inventory in the third quarter.
Fortunately, the third-quarter setback took just one quarter to remedy. During the last three months of 2004, the chain burned off almost the entire surplus accumulated in the third quarter and now is on track to dispense with the remaining excess in the first half of 2005, iSuppli believes.
