ISuppli Warns of Chip Inventory Tsunami

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The amount of excess chips waiting to be placed inside gadgets is likely to triple in the final three months of this year because demand is falling at a much faster pace than anticipated, iSuppli said Tuesday.

"This [inventory] rise is having a deleterious impact on semiconductor pricing, revenue and profitability, and could delay the semiconductor industry's recovery from the current downturn -- even when demand rebounds," the market research firm said in a statement.

iSuppli predicts the amount of excess semiconductors in the electronics supply chain could balloon to more than US$10.4 billion by the end of the fourth quarter, up from $3.8 billion at the end of the third quarter.

By comparison, excess inventory at the beginning of the dot-com bust was $13.4 billion, iSuppli said.

iSuppli issued a red alert on semiconductor inventory levels due to the fourth quarter rise, a first for the company.

The inventory report came on the same day Gartner revealed a dour forecast for semiconductor industry revenue next year. The researcher expects global chip revenue to decline 16.3 percent year-over-year in 2009 to $219.2 billion. Last week, Gartner lowered its chip industry revenue forecast for this year to a 4.4 percent drop.

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