Chip sales slide in Q4 amid inventory, pricing gloom

SAN FRANCISCO--A major industry analyst firm sounded alarm on global IC sales Friday (Dec. 14), citing falling fourth quarter revenue for chip vendors, relentless price pressure and stubbornly high inventories.

"Fears abound that industry revenue could decline even more than currently predicted in the fourth quarter, if economic conditions do not improve," IHS said in its regular Semiconductor Manufacturing & Supply Market Tracker Report.

"The complete reversal in growth is indicative of how distressing conditions have become for the industry, and the downward pressure on sales has not eased," IHS said.

Q4 semiconductor revenue is forecast to fall by 0.7 percent compared to the third, which will pull 2012 overall performance down farther to a projected annual decline of 2.3 percent to $310 billion. The semiconductor industry in 2011 rose 1.3 percent by contrast.

“The global economy continues to be the most critical variable affecting the semiconductor space both this year and the next, especially because the chip industry is highly dependent on consumer spending,” said Len Jelinek, director and chief analyst of semiconductor manufacturing at IHS. “And until consumers believe their financial position is stable or improving, consumer spending will likely remain soft.”

IHS said December will be lackluster months as anticipated holiday system sales have already been made. In the near term, no major IC-sales drivers are evident, IHS added.

The IHS also report emphasized its concern over high inventory levels.

"Given the excess inventory, end-equipment manufacturers have been delaying the placement of orders for additional components. The result on the whole is that chip suppliers aren’t running their manufacturing operations optimally, and also are manufacturing products solely based on historical demand," IHS said.

The report did offer a ray hope among what it termed a "fragile growth scenario." Supply and demand should even out in the first quarter of 2013, and silicon shipments are forecast to rise near the end of that period, IHS said.