Inventory management: Key to 2009 re-emergence, 2010 surge
Despite reported warnings of inventory bloat at electronic distributors, nearly all segments of the chip supply chain remain lean, with inventory levels at distributors "well below the historical average," according to a report from iSuppli.
Distributors' days-of-inventory (DOI) at the end of 3Q09 was actually down 15% from the same time a year ago; in dollar terms that equaled $4.8B worth of chips, which was down 22% from 3Q08. That distributor DOI was 17% less than the trailing three-year average, according to iSuppli analyst Carlo Ciriello. With final numbers not yet available at press time, DOI was expected to have continued to decline in 4Q09 (to 18.7% below the three-year average), vs. a slight incline in inventory dollars. The decline in stockpiles parallels that among chipmakers, which saw DOI shrink to 66.4 in 3Q09, down 11% from the same period a year ago.
|Quarterly days-of-inventory among distributors and semiconductor suppliers. (Source: iSuppli)|
"Semiconductor suppliers have been maintaining tight control over inventories," preferring just-in-time fulfillment instead of "capital-constraining shelf stocking," according to Ciriello. The result: "lower inventories throughout the electronics supply chain, including at distributors." Makers of PCs, storage devices including hard-disk drives, and cell phones also saw semiconductor DOI in 4Q09 lower than historical levels. Any increase in demand for those end products likely will translate directly into new chip sales.
The recovery of the chip industry in 2H09 can be directly attributed to just this "deft management of semiconductor inventories," Ciriello notes. And as demand recovers, these lean inventory levels will continue to drive the market's return to growth in 2010: 15.4% growth in revenues, vs. a -12.4% decline in 2009, the firm predicts.
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