Bad news on the horizon from analyst house IHS about global semiconductor inventories.
As we reported earlier this week, we reported how chief analyst at Future Horizons, Malcolm Penn, predicted there's a chance the chip market might grow just one percent this year. Not good news, then, that IHS says inventory levels are at a height we haven't seen since the beginning of the recession in 2008.
IHS' inventory insider report says that stockpiles by the end of the second quarter were at an unprecedented high of 83.4 Days of Inventory (DOI). That trumps even the 83.1 DOI in the first quarter of 2008, when times turned tough.
The second quarter this year sees the first time in 12 consecutive quarters, IHS says, that the DOI has tipped over from 80 days. It was 11 percent above the seasonal average in the second quarter, which is just shy of the 11.1 percent oversupply from the first quarter in 2008. What followed was a down-turn the industry had just started to climb out from.
IHS claims it is a warning for chipmakers - with revenue projections rolled back across the industry indicative of a stagnant, or at least stalling gobal economy.
Still, there is some good news, with decent performances penned in for data processing and wireless, which IHS says should lessen the blow and make up for declines elsewhere.
I'm guessing it's partly because the manufacturers scaled production down so if you want something that is not in the stockpile, it's tough luck for you. Even if manufacturers run out of some chips, they are reluctant to do a production run until they have the minimum volume of orders that make it worthwhile for them. If they jump on a small volume order and do their minimum production run (which tends to be quite large), they may end up just adding to their inventory with the leftover chips. Even if the manufacturer gets a large enough order to get their attention, the customer has to wait until their parts get queued in and trickle through production which can take quite long.