IC Inventory Reduction Continues, At a Slower Pace

Two years after the electronics supply chain was saddled with a staggering $15 billion in excess semiconductor inventory, the glut has been slashed by a factor of 10, according to research from the iSuppli Semiconductor Inventory Tracker Market Analysis Service.

Based on an assessment of the initial wave of financial results reported in January, excess inventories in the semiconductor supply chain continued to ease in the fourth quarter of 2002, iSuppli believes. Excess semiconductor inventories at chip suppliers, Electronics Manufacturing Service (EMS) providers, distributors, OEMs and retailers fell to just $1.5 billion in the fourth quarter, down 6.3 percent from $1.6 billion in the third quarter.

Inventory write downs continued during the fourth quarter, but at a reduced pace across the supply chain. Excess inventories fell by 38 percent in the third quarter of 2002, by 4 percent in the second quarter and by 33 percent in the first quarter. The remaining excess appears to be concentrated at the semiconductor suppliers themselves, with companies in the other segments of the supply chain maintaining inventory levels that are near equilibrium. In fact, distributors, EMS providers, and OEMs are running very lean on inventories across the board, even in the telecom/networking sector, iSuppli believes.

This marks the third consecutive quarter in 2002 that excess inventory has hovered around the $2.5 billion range. With the excess inventory stuck at that level, it increasingly appears that the year will end with lingering surplus stockpiles in the supply chain.

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