Excess chip inventory set to hurt Q1

LONDON – Semiconductor revenue is likely to decline sequentially by 3 percent in the first quarter of 2013 because chip inventory held by semiconductor suppliers reached high levels at the end of 2012, according to market analysis firm IHS.

IHS said that a 3 percent fall in Q1 would come on top of a sequential decline of 0.7 percent in 4Q12.

The market researcher said that the value of stockpiled chips at semiconductor suppliers reached 47.5 percent of revenue in 2Q12 and 49.3 percent of revenue in 3Q12, higher than at any point since the first quarter of 2006. This is the last quarter for which full figures are available.

IHS excludes memory from its measurement of the inventory situation.

The high levels of inventory are due to a reluctance to spend across multiple sectors due to general economic uncertainty. In particular the PC market, the largest user of semiconductors, performed poorly in 2012. High demand was only seen for smartphones and tablet computers, the firm said.

Performance in 2013 will depend on the global economy and consumer confidence. If the global economic forecasts perform according to positive expectations, semiconductor revenue could grow by 4 percent in the second quarter and by 9 percent in the third. However, if confidence sinks due to economic crises it could lead to a continuing oversupply situation and inventory write-downs throughout the year, IHS said.