Chip glut weighs on semiconductor makers

Industry leaders and analysts have been giving optimistic signs about a recovery in the computer chip industry over the past few days, but a new report finds that there is still a massive semiconductor glut that could linger into the middle of next year.

Despite efforts to reduce excess inventories left over when the slowing economy reduced orders from computer manufacturers, there is still $8bn in excess inventory sitting on chip manufacturers' shelves, according to a new report from research firm iSuppli.

"While there is a modicum of good news for the personal computer, computing platform and wireless market segments with replenishment ordering for components beginning, we are revising our forecast for worldwide semiconductor revenue this year downward to $147bn (£103bn) -- an annual decline of 28 percent," said Greg Sheppard, the company's vice president for market intelligence services, in a statement.

"We see the market decline hitting bottom in the third quarter with a further 2 percent downward move for revenues from the previous period, with revenue growth up 4 percent from this low level in the last quarter of the year, thanks largely to a traditional seasonal boost from consumer purchases toward the end of the year," he added. "The reason for this gloomy forecast is quite clear -- $8bn in excess inventories continue to put a damper on unit ordering and prices," Sheppard stated.

The group said that prices could begin rising in the second half of next year when capital spending upgrades and major infrastructure build-outs in China kick in.

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