iSuppli highlights consumer market and inventory challenges

Rising Semiconductor Inventory Spurs Oversupply Fears. Also Consumer Electronics Market Flourishes, but Can Semiconductor Vendors Stay in Business?

Visit isuppli web site to see more on these stories.

According to the reports, semiconductor inventory levels may have headed into oversupply territory in the Q3. Semiconductor Days Of Inventory for chip suppliers are estimated to have climbed to 75.9 days in the third quarter of 2010, up 1.5 days from the second-quarter.

“With inventories predicted to grow in the third and fourth quarters, manufacturers likely will seek to balance the current situation of long lead times and capacity constraints against concerns regarding of softening demand through the end of 2010, especially in particular sectors like PCs,” Stiefel said. “Adding to the general anxiety are fears of global demand weakening in the face of continued economic uncertainty. As inventories continue to build through the end of the year, the potential exists for oversupply to steal back into the supply chain. The result is that the industry will need to keep a watchful eye to adjust manufacturing at the first sign of softness in demand.”

Protecting assets, and maintaining lean operations to reduce inventories doesn't bode well for ATE companies.

On the consumer electronics front, revenue in 2010 is projected to reach $259.0 billion, all but erasing the decline of the previous year when revenue fell by more than 3 percent. And in an ongoing sign of strength, revenue will continue to rise in the coming years, increasing by 6.7 percent in 2011 and by 7 percent in 2012. Expansion will slow to 1.2 percent in 2013, after which the market is projected to contract by 0.6 percent in 2014.

The increase in consumer electronics revenue is currently fueled by high-value and high volume products such as LCD-TVs and Blu-ray players, iSuppli research indicates. At the heart of such popular consumer electronic devices are leading-edge chips and other semiconductors that provide core functionality.