Chip Supplier Q2 Inventories Hit Three-Year High as Demand Wanes
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Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 1.1%
EPS Growth %: -200.0%
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Chip supplier inventories have swelled to levels not seen since the financial fallout of 2008, and that may raise concerns about the near-term performance in the sector.
According to data from IHS (NYSE: IHS) iSuppli, semiconductor days of inventory (DOI) held by chip suppliers at the end of the second-quarter was 83.4, from 73.1 DOI in the first quarter of 2008.
Notably, DOI jumped 3.5 days from 79.9 DOI in the first-quarter of 2011, and this is the first time that DOI has bested the 80-day mark in the last 12 quarters.
ISuppli also noted that, "the inventory level in the second quarter was 11 percent above the historical seasonal average usually recorded for the period. This is close to the 11.1 percent oversupply seen in the first quarter of 2008, right at the start of a two-year downturn in the semiconductor industry."
Indicators point to continued challenges in the chip realm: iSuppli sees U.S. GDP moving from 3.0 percent in 2010 to just 1.7 percent in 2011. Further, IHS semiconductor revenue forecast was recently revised down from 4.6 percent of annual growth to 2.9 percent, sharply lower than the 32.4 percent growth recorded in 2010.
Aiming to adjust for reduced market demand, chip suppliers could be ailing from recalibrated inventory and capacity utilization.
Looking ahead, iSuppli is aiming for 4.8 percent growth in the semiconductor industry, though inventory expectations were not given.
Friday's revelation shouldn't be a surprise to many. Recently,Texas Instruments (NYSE: TXN) narrowed and lowered it's third-quarter outlook, citing demand loss on a wide range of products.
Last quarter, Intel (Nasdaq: INTC) did the same thing, with earnings and revenue beating expectations, but Atom chipset revenue fell 15 percent.
Also keep an eye on: Applied Materials, Inc. (Nasdaq: AMAT), Altera Corp. (Nasdaq: ALTR), Analog Devices, Inc. (NYSE: ADI), and Xilinx, Inc. (Nasdaq: XLNX), among others.
According to data from IHS (NYSE: IHS) iSuppli, semiconductor days of inventory (DOI) held by chip suppliers at the end of the second-quarter was 83.4, from 73.1 DOI in the first quarter of 2008.
Notably, DOI jumped 3.5 days from 79.9 DOI in the first-quarter of 2011, and this is the first time that DOI has bested the 80-day mark in the last 12 quarters.
ISuppli also noted that, "the inventory level in the second quarter was 11 percent above the historical seasonal average usually recorded for the period. This is close to the 11.1 percent oversupply seen in the first quarter of 2008, right at the start of a two-year downturn in the semiconductor industry."
Indicators point to continued challenges in the chip realm: iSuppli sees U.S. GDP moving from 3.0 percent in 2010 to just 1.7 percent in 2011. Further, IHS semiconductor revenue forecast was recently revised down from 4.6 percent of annual growth to 2.9 percent, sharply lower than the 32.4 percent growth recorded in 2010.
Aiming to adjust for reduced market demand, chip suppliers could be ailing from recalibrated inventory and capacity utilization.
Looking ahead, iSuppli is aiming for 4.8 percent growth in the semiconductor industry, though inventory expectations were not given.
Friday's revelation shouldn't be a surprise to many. Recently,Texas Instruments (NYSE: TXN) narrowed and lowered it's third-quarter outlook, citing demand loss on a wide range of products.
Last quarter, Intel (Nasdaq: INTC) did the same thing, with earnings and revenue beating expectations, but Atom chipset revenue fell 15 percent.
Also keep an eye on: Applied Materials, Inc. (Nasdaq: AMAT), Altera Corp. (Nasdaq: ALTR), Analog Devices, Inc. (NYSE: ADI), and Xilinx, Inc. (Nasdaq: XLNX), among others.
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