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Semiconductor prices to recover 2012
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Tuesday, November 29, 2011
With an inventory correction well under way, semiconductor sales will remain tepid for the rest of the year before returning to sequential growth sometime in the second half of 2012, according to market research firm Gartner Inc.
The days of inventory (DOI) level in the semiconductor supply chain was elevated going into the third quarter, but corrective action will help bring it under back control at the cost of reduced sales for chip vendors, according to Gartner. DOI is an efficiency ratio that measures the average number of days the company holds its inventory before selling it.
"We expect that average selling prices (ASPs) for foundry-produced components will be under pressure through the first half of 2012 because of aggressive investment in capacity made as the industry came out of the last recession," said Peter Middleton, principal research analyst at Gartner, in a statement. "That investment is leading to excess capacity at the same time as concern is rising about end-market demand levels due to weak economic prospects."
Gartner (Stamford, Conn) noted that many semiconductor firms have reported relatively weak third quarter sales and guided for more of the same in the fourth quarter. The firm said its index of chip inventory supply chain tracking, dubbed Giisst, moved further into the "caution zone" in the third quarter, hitting 1.16, up from 1.12.
According to Gartner, Giisst measures the health of the semiconductor industry -- gauging the normal inventory level at each stage of production that will allow for a smooth flow of products and management of the production process without inventory shortages or surpluses. Within the metric, a level above 1.10 indicates that inventories are inflated, likely to put downward pressure on ASPs, Gartner said. Below the 0.95 level indicates that inventories are low, components may be on allocation, and double ordering begins, according to the firm.
"The proportion of total semiconductor inventory held by OEMs has begun to rise; however, it is still near historic lows, which will help reduce the impact of an order correction on semiconductor vendor sales," said Gerald van Hoy, senior research analyst at Gartner.
By: DocMemory
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