Chip sales slide in Q4 amid inventory, pricing gloom

Chip sales slide in Q4 amid inventory, pricing gloom

SAN FRANCISCO--A major industry analyst firm sounded alarm on globalIC sales Friday (Dec. 14), citing falling fourth quarter revenue forchip vendors, relentless price pressure and stubbornly highinventories.

"Fears abound that industry revenue could decline even more thancurrently predicted in the fourth quarter, if economic conditions donot improve," IHS said in its regular Semiconductor Manufacturing& Supply Market Tracker Report.

"The complete reversal in growth is indicative of how distressingconditions have become for the industry, and the downward pressureon sales has not eased," IHS said.

Q4 semiconductor revenue is forecast to fall by 0.7 percent comparedto the third, which will pull 2012 overall performance down fartherto a projected annual decline of 2.3 percent to $310 billion. Thesemiconductor industry in 2011 rose 1.3 percent by contrast.

“The global economy continues to be the most critical variableaffecting the semiconductor space both this year and the next,especially because the chip industry is highly dependent on consumerspending,” said Len Jelinek, director and chief analyst ofsemiconductor manufacturing at IHS. “And until consumers believetheir financial position is stable or improving, consumer spendingwill likely remain soft.”

IHS said December will be lackluster months as anticipated holidaysystem sales have already been made. In the near term, no majorIC-sales drivers are evident, IHS added.

The IHS also report emphasized its concern over high inventorylevels.

"Given the excess inventory, end-equipment manufacturers have beendelaying the placement of orders for additional components. Theresult on the whole is that chip suppliers aren’t running theirmanufacturing operations optimally, and also are manufacturingproducts solely based on historical demand," IHS said.

The report did offer a ray hope among what it termed a "fragilegrowth scenario." Supply and demand should even out in the firstquarter of 2013, and silicon shipments are forecast to rise near theend of that period, IHS said.


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