Chip Market Turnaround Unlikely In 2009 - InformationWeek

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Infrastructure // PC & Servers

Chip Market Turnaround Unlikely In 2009

The semiconductor industry has done a better job managing inventory than in the 2001 economic crisis, said Gartner.

The semiconductor market is unlikely to see a significant market turnaround this year, despite manufacturers' success at reducing inventory, which had reached levels of "severe excess" for four quarters, a research firm said.

Gartner reported Monday that its Dataquest Semiconductor Inventory Index continued to fall in the third quarter, dropping into the "caution zone" from the "severe excess" level. However, the analyst firm believes manufacturers won't see stabilization in inventory until at least 2010, when growth is expected to resume.

While some semiconductor categories are seeing an increase in sales, others are seeing a drop in inventory because of "continued conservative efforts in keeping the supply chain lean," Gartner analyst Gerald Van Hoy said in a statement.

"Concerns of possible shortages in inventory seem to be premature, but inventory should continue to be monitored, especially in large-scale markets, such as PCs and cellular phones," Van Hoy said.

While shortages are possible, they will most likely be "few and far between," Gartner said. Those that do occur are expected to be short-lived.

While the semiconductor market will experience a drop in revenue this year, growth is expected to return next year, with sales continuing to rise in 2011, the researcher said. Overall, while the decrease in demand has been severe in the global recession, manufacturers have done a better job at keeping inventory in line with demand than in the last economic crisis that started in 2001 following the dot-com bust.

Gartner in February predicted that worldwide revenue from semiconductors this year would fall 24.1% from 2008 to $194.5 billion, a near record low.

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