Chip market to rebound in second half

Posted

Market watcher iSuppli says the chip market will begin a recover in the second half of the year as stockpiled parts in the supply chain are used up.


After an 18.8 percent decline in the first quarter of the year and a 7.1 percent increase in the second, semiconductor revenues will rise in the second half. In Q3, revenues will increase by an encouraging 10.4 percent and 4.9 percent in the fourth, says iSuppli.


Following 12 months of manufacturers using up their chip stockpiles, due to slack demand in the face of the recession, their inventories are now depleted to the point where new orders are needed. At the end of the second quarter, iSuppli reckons that the value of inventories fell to $24.9 billion, down from $32.6 billion in the second quarter of 2008.


"Falling demand in the first half of 2009 prompted a swift inventory correction among chip suppliers," Carlo Ciriello, financial analyst for iSuppli, told Digitimes. "Companies dialed down utilization levels and cleared swaths of inventory by reducing ASPs in anticipation of continued depressed demand. Furthermore, semiconductor suppliers cut costs in an effort at right-sizing to better reflect the economics of smaller end markets.


"Anticipating longer term end demand has proven difficult," Ciriello added. "A self-inflicted oversupply situation with too much inventory build would be akin to applying frost to blossoming green shoots."