Monday, 10 October 2011

Inventory levels continue to rise - Is this 2008 all over again?

According to recent reports by industry experts at Gartner and IHS iSuppli semiconductor inventory levels have reached “worrisome levels” and are manufacturers are “wading into troubled territory”.

“Total semiconductor inventory at the end of the second quarter, as measured by Days of Inventory (DOI) factor, stood at an unusually elevated 83.4 days - a level exceeding even the last record high of 83.1 days seen in the first quarter of 2008” says Steifel.

This is 11% above the season average and calls for correction before it is too late.

What does this mean today?
Gartner analysts state “Excess inventory levels helped buffer the impact of the Japanese earthquake; however now action should be taken to rationalize stock levels in the face of macroeconomic weakness”. With lead times becoming less of an issue and uncertain demand for Q4 2011 and 2012, now is the perfect time to sell your excess inventory before the industry weakens.

In a surplus market, a manufacturer with surplus inventory could make significant losses. When opting for cash purchase of excess, EOL, slow-moving or ex-works inventory it is unlikely that the full costs of the assets will be recovered. But, in a saturated market the stock will be easier to procure and the demand lower. 

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