Semiconductor inventory decline expected for Q1 2012

Summary:Although there are extra stockpiles of semiconductors now, it might not be all bad news for chip suppliers as IHS analysts are expecting higher levels of demand to resume soon.

As problems with the semiconductor industry in Japan is becoming more evident, global semiconductor inventories are expected to have declined during the first quarter of 2012, according to IHS iSuppli.

The two biggest culprits: slower demand combined with an excess of chip production.

This certainly doesn't come as welcome news to computer and other device manufacturers as they deal with a slump in the hard drive market as well.

Although the semiconductor inventories were at their highest point in 11 years at the end of Q4 2011, Sharon Stiefel, an analyst for semiconductor market intelligence at IHS, countered in the report that the same quarter proved to be "disappointing from both a revenue as well as earnings standpoint."

Global semiconductor revenue declined by 2.8 percent compared to the fourth quarter of 2010 as customer orders declined. Meanwhile, semiconductor suppliers struggled to balance their factory utilization levels against the drop in demand, leading to the rise in semiconductor inventories.

Nevertheless, it might not be all bad news for chip suppliers. IHS analysts are expecting higher levels of demand to resume soon.

Stiefel added:

Should semiconductor demand rise more than projected, those companies holding excess inventory could turn that to their advantage later in 2012, because they will be in a better inventory position than those that have become too lean.

Related:

Topics: Processors, Hardware, Networking

About

Rachel King is a staff writer for CBS Interactive based in San Francisco, covering business and enterprise technology for ZDNet, CNET and SmartPlanet. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish Americ... Full Bio

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