Days of inventory of semiconductors are at “worrisome levels given current conditions,” according to market research firm, Gartner. The expectation is that an inventory correction is due in late 2011. Gartner also noted that average selling prices (ASPs) were tracking below trend levels, with overcapacity in the foundry industry expected to prolong the pricing weakness.
Gartner expects that the industry will undergo a moderate inventory correction during the next few quarters, which will lower demand for semiconductor production in the second half of 2011 and early 2012.
According to Gartner, the proportion of total semiconductor inventory held by OEMs is rising but coming off near historic lows, which will help reduce the impact of an order correction on semiconductor vendor sales.
"The semiconductor industry entered the third quarter of 2011 with moderately high levels of inventory," noted Gerald Van Hoy, senior research analyst at Gartner. "Current levels are too high given the weakening economic sentiment, and the industry must rein in production growth and take action to reduce accumulated inventory. We expect that these actions will occur during the next few quarters with production and sell-through expected to return roughly to balance by the second quarter of 2012."
Gartner Index of Inventory Semiconductor Supply-chain Tracking (GIISST) remains at caution levels with days of inventory (DOI) at 1.12 in 3Q11. Within the GIISST, an above DOI level of 1.10 indicates inventories are inflated.