Semiconductor Inventories Remain Challenging in Q4
But Some Stuff Will Never Sell
Inventory control in the electronics supply chain has been the No.-1 concern for managers so far in 2009. The collapse of demand in the fourth quarter of 2008 led to a surge in inventories at all nodes in the chain, and firms have been doing everything they can to shed finished goods, slow work in process and push back raw materials to suppliers. Despite their good intentions, managers have been taught painful new lessons about supply and demand, economics and pricing, iSuppli Corp. believes.
During the fourth-quarter reporting season, the electronics supply chain announced precipitous declines in revenues of about 21 percent, but only moderate declines in inventory dollars, amounting to about 3 percent. The end result was a spike in days of inventory and further uncertainty about how best to work down stockpiles and simultaneously manage utilization. Thus far in 2009, there has been a spate of significant resizing efforts.
Managers have slashed utilization levels to an industry average of approximately 37 percent. They also have
commenced layoffs, shuttered capacity, written-off nearly all their goodwill and held fire sales to clear inventories of everything from televisions to analog chips. Unfortunately, all of that wasn’t enough; guidance for the first quarter of 2009 is for supply chain revenues to decline even further, declining by approximately 19 percent, and for days of inventory to remain flat.
iSuppli’s Inventory Tracker Service now monitors PCs and handsets, along with semiconductor manufacturers, Electronics Manufacturing Service (EMS) providers, distributors and more to provide an unprecedented high level
and granular views of the current—and future—states of the electronics supply chain.
Developments in these equipment end markets include:
1. Among PC OEMs, fourth-quarter 2008 revenue declined by 11 percent sequentially and total manufacturer inventory value fell by 8 percent sequentially. As a result, Days of Inventory (DOI)
remained flat at 20 days.
2. Among handset manufacturers, fourth-quarter revenue declined by 10 percent sequentially and total
OEM inventory value fell 17 percent sequentially. As a result, days of inventory shrunk slightly to 29 days.
iSuppli believes firms losing market share during the next year will find it difficult to regain their former strength. Inventory is a key performance indicator since its optimization can achieve advantages in pricing, utilization, sales and profits.
Buckle up: The road to survival and prosperity will be littered with the carcasses of old business models driven out of the market by the combined burden of weak demand and inflated inventories.
Inventory control in the electronics supply chain has been the No.-1 concern for managers so far in 2009. The collapse of demand in the fourth quarter of 2008 led to a surge in inventories at all nodes in the chain, and firms have been doing everything they can to shed finished goods, slow work in process and push back raw materials to suppliers. Despite their good intentions, managers have been taught painful new lessons about supply and demand, economics and pricing, iSuppli Corp. believes.
During the fourth-quarter reporting season, the electronics supply chain announced precipitous declines in revenues of about 21 percent, but only moderate declines in inventory dollars, amounting to about 3 percent. The end result was a spike in days of inventory and further uncertainty about how best to work down stockpiles and simultaneously manage utilization. Thus far in 2009, there has been a spate of significant resizing efforts.
Managers have slashed utilization levels to an industry average of approximately 37 percent. They also have
commenced layoffs, shuttered capacity, written-off nearly all their goodwill and held fire sales to clear inventories of everything from televisions to analog chips. Unfortunately, all of that wasn’t enough; guidance for the first quarter of 2009 is for supply chain revenues to decline even further, declining by approximately 19 percent, and for days of inventory to remain flat.
iSuppli’s Inventory Tracker Service now monitors PCs and handsets, along with semiconductor manufacturers, Electronics Manufacturing Service (EMS) providers, distributors and more to provide an unprecedented high level
and granular views of the current—and future—states of the electronics supply chain.
Developments in these equipment end markets include:
1. Among PC OEMs, fourth-quarter 2008 revenue declined by 11 percent sequentially and total manufacturer inventory value fell by 8 percent sequentially. As a result, Days of Inventory (DOI)
remained flat at 20 days.
2. Among handset manufacturers, fourth-quarter revenue declined by 10 percent sequentially and total
OEM inventory value fell 17 percent sequentially. As a result, days of inventory shrunk slightly to 29 days.
iSuppli believes firms losing market share during the next year will find it difficult to regain their former strength. Inventory is a key performance indicator since its optimization can achieve advantages in pricing, utilization, sales and profits.
Buckle up: The road to survival and prosperity will be littered with the carcasses of old business models driven out of the market by the combined burden of weak demand and inflated inventories.
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