Semi suppliers cutting wafer starts, says iSuppli

MANHASSET, N.Y. — Lingering excess chip inventories are forcing semiconductor suppliers to cut their wafer starts and reassess their capital spending plans, according to the latest research from iSuppli Corp.'s Semiconductor Inventory Tracker service.

iSuppli (El Segundo, Calif.) expects the current trends to continue into 2005. Utilization at the major foundries also will plunge over the next two quarters.

Surplus chip inventories in the electronics supply chain swelled to $1.6 billion in the third quarter, up 103 percent from $800 million in the second quarter, according to the latest numbers figures from iSuppli (El Segundo, Calif.) This includes inventories held by semiconductor suppliers as well as OEMs, contract manufacturers and distributors.

The excess inventory numbers are even higher than those released by the firm in October, when excess inventories were estimated at $1.1 billion.

iSuppli's latest figures show semiconductor suppliers accounting for 89 percent of the $1.6 billion in surplus stockpiles, compared with 86 percent estimated two months ago. Days of inventory (DOI) held by semiconductor suppliers in the third quarter increased by six percent compared to the year-ago period.

The firm said OEMs' and distributors' efforts to reduce inventories pushed products back onto the books of semiconductor suppliers. Decreasing lead times will deter these customers from placing new orders until demand indicators are more certain.

iSuppli expects excess inventories to decline only marginally to $1.5 billion by the end of the fourth quarter.