Wed, May 17, 2006 - Page 12 News List

Chip inventory not yet a threat to sales growth: Gartner

By Lisa Wang  /  STAFF REPORTER

Chip inventory accumulated early this year does not yet pose a threat to growth in the global semiconductor industry, which may enjoy a 10 percent increase in revenues this year on rising demand for consumer gadgets, market researcher Gartner Inc said yesterday.

Inventory is seen as a barometer for the chip industry after a run-up in stock sparked the last industry downturn in 2004.

"It is not a massive concern for us at the moment as the increase in inventory [in the first quarter] is normal and expected in the quiet period," Andrew Norwood, who tracks semiconductor industry for Gartner, told a press conference in Taipei.

Based on the inventory index designed by the US research house, inventory rose to 1.08 in the first quarter of this year. While this represented the highest level since inventory began climbing in the second quarter of last year, Gartner said this was still considered normal.

At the same time, Gartner cautioned about the rise. As Norwood said, low inventory levels may lead to increased production in anticipation of demand. If demand does not materialize as anticipated, inventories could rise like in 2004, he said.

Rick Tsai (蔡力行), the chief executive of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's top made-to-order chipmaker, told investors late last month that inventory rose at a faster rate than the seasonal pattern in the first quarter, mostly due to weaker-than-expected computer sales. But Tsai said his company and customers had already taken action to curb the stock from overshooting.

Given a better-than-expected memory chip market, Gartner raised its forecast for chip revenues this year to US$259.5 million, up 10.6 percent from US$234.6 million last year.

The market researcher expects growth to peak in 2008 at US$322.1 million before reversing in 2009 owing to a glut in memory chips.

With 14 percent annual growth expected in 2008, it would be a mild boom, compared with the 25 percent growth in peak years in the past, because of slow unit growth in major applications such as computers and mobile phones, Norwood said.

The markets for those two applications are nearing saturation, and no killer applications have emerged yet to provide new growth momentum, he said.

"In 2008, I want to buy a plasma TV for the Beijing Olympics, but I don't know what to buy in 2012 [for the next Olympics games in London]," he said.

Gartner predicted that chip revenues would grow at a compound annual growth rate of 8.5 percent from last year to 2010 with the fastest expansion in the consumer electronics area, especially cellular phones and digital media players.

Gartner's forecast largely matches the projection of the semiconductor bellwether TSMC. Tsai told shareholders yesterday in Hsinchu that semiconductor sales should rise by 8 percent this year.

He also said last month that he expected global chip revenues to rise by a high single-digit figure next year.

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