SAN FRANCISCO—Thanks to weaker-than-expected shipments in November, inventories for Asian semiconductor distributors have grown far beyond desired levels, something likely to have a negative impact on overall chip shipments in the first half of 2009, according to a Wall Street analyst.
Chip distributors could end the year with up to 60 days inventory on hand, higher than the desired level of 40 to 45 days, according to Craig Berger, an analyst with FBR Capital Markets. November distributor shipments were "very weak," increasing distributors' inventories by three to five days from October, Berger wrote.
Earlier this month, market research analyst iSuppli Corp. warned that the semiconductor market should brace for a flood of excess inventory that could further depress sales in 2009 as equipment manufacturers across the high-tech industry slash component demand amid a downturn in end demand.
Citing recent checks with Asian chip distributors, Berger said aggregate Asian distributor chip shipments fell 27 percent month-to- month in November. The weak shipments were driven by softer-than-expected PC, consumer, and Chinese white box handset shipments, Berger said. Distributors are also limiting shipments to certain customers due to concerns about those customers' credit worthiness, he said. Berger noted that netbooks and flash cards outperformed other sectors in November.
Shipments from Texas Instruments Inc., Microsemi Corp. and Advanced Micro Devices Inc. declined as much as 20 to 30 percent from October to November, Berger wrote.
Berger said contacts expect DRAM pricing to continue to decline through the spring, and said that further production cuts need to come from Samsung Electronics Co. Ltd. and Micron Technology Inc. in order for pricing to stabilize in the second half of 2009.
Last week, Taiwanese DRAM clearing house DRAMeXchange reported that spot prices for some DRAM chips are on the rebound thanks to production cuts by several vendors.
Contacts believe that December revenues will decline in aggregate 17 percent from November, four points below the 5-year historical average, due to poor holiday demand, Berger said. Contacts expect a 15 to 20 percent sequential decline in distributor shipments for the first quarter of 2009, Berger said.