iSuppli warns of chip inventory tsunami

Demand is falling much faster than expected

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 Corp. 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 $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.

The company issued a red alert on semiconductor inventory levels because of the fourth-quarter rise, a first for the company.

The inventory report came on the same day that Gartner Inc. revealed a dour forecast for semiconductor industry revenue next year. The research firm expects global chip revenue to decline 16.3% 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% drop.

Copyright © 2008 IDG Communications, Inc.

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