SAN FRANCISCOGlobal chip revenue in the third quarter is likely to rise by 3 percent more than actual demand would dictate, creating an artificial bump in sales thanks to lean inventory levels, according to market research firm iSuppli Corp.
In the second quarter, global inventories returned to lean, appropriate levels after swelling to excessive levels in 2008, iSuppli (El Segundo, Calif.) said. But third quarter moves to achieve supply-demand equilibrium are likely to create artificial demand, the firm said.
According to Carlo Ciriello, financial analyst for iSuppli, semiconductor suppliers acted quickly to reduce inventories after they swelled to excess in 2008.
"However, the pendulum swung too far in the opposite direction in the second quarter, leaving inventories at lean levels," Ciriello said.
In the second quarter, days of inventory (DOI) at semiconductor suppliers fell short of optimal levels by 6.1 percent, iSuppli said. This represents a vast improvement over the fourth quarter of 2008, when DOI exceeded equilibrium by 14.8 percent, according to the firm.
ISuppli said there is no imminent danger of chip shortages at this time. With global semiconductor factory utilization at extremely low levels, suppliers can easily boost their manufacturing to meet demand, according to the firm.
But while the ongoing inventory adjustment may be good news for the supply chain, the semiconductor industry is likely to suffer a harsh return to reality after inventory replenishment concludes, according to iSuppli.
"The inventory restocking effort will run its course by the end of the third quarter, leaving sales to be driven only by actual end-market demand," Ciriello said. "This will bring an end to the artificial boost in sales and sentiment generated by the inventory rebuilding effort."
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Optimal DOI is calculated by iSuppli based on semiconductor demand, and is adjusted for factors including seasonality, revenue fluctuations and margins, according to the firm.
A report, entitled, "Inventories Set on a Glide Path to Equilibrium in Q3 2009.," is being offered for sale through iSuppli's website.