Deliver Your News to the World

Gartner Says Semiconductor Industry Continues to Shed Inventory but Significant Market Turnaround Unlikely in 2009


Analysts ’Cautiously Optimistic’ About Return to Growth in 2010 and 2011

STAMFORD, Conn. - The Dataquest Semiconductor Inventory (DASI) Index will continue to fall in the third quarter of 2009, having moved from the “severe excess” level of 1.21 and higher during the past four quarters to just inside the “caution zone” (1.10 to 1.20), according to Gartner, Inc. However, analysts warned that the DASI Index will not stabilize until at least 2010, when Gartner forecasts the next year of growth for the semiconductor industry.

Gartner employs the DASI Index to provide an aggregate view of the inventory health of the semiconductor industry by assessing normal inventory levels throughout the supply chain and comparing them with current levels to evaluate industry trends. It gauges the normal inventory level at each stage of production that will allow for a smooth flow of products and management of the production process without inventory shortages or surpluses.

The DASI Index includes control zones* of “Normal” and “Warning.” Above 1.10, inventories are inflated, and there is likely to be downward pressure on average selling prices. Below 0.95, inventories are low, components may be on allocation and double-ordering begins.

“While some industries are experiencing a fundamental demand-side recovery, other industries are benefiting from a reduction in inventory simply because of their continued conservative efforts in keeping the supply chain lean,” said Gerald Van Hoy, senior research analyst at Gartner. “Concerns of possible shortages in inventory seem to be premature, but inventory should continue to be monitored, especially in large-scale markets, such as PCs and cellular phones.”

“Even though revenue has been showing positive growth, there is not enough of it to overcome the declines we saw at the beginning of 2009, and we do not see indications of this changing before the end of the year. Nevertheless, the industry continues to shed inventory, which has made the current crisis manageable,” Mr. Van Hoy said.

While the economy is in a recovery phase and sensitive to global conditions — such as natural disasters and political events — Gartner continues to express cautious optimism for the immediate future and predicts that the market will return to growth in 2010 and 2011.

Mr. Van Hoy explained that this cautious optimism is largely due to the fact that there are crucial differences between the present semiconductor supply chain and the one that existed at the last major crisis in 2001 to 2002.

“The decrease in demand has been severe, yet the response in absolute inventory levels has been more in tune with the change in demand,” he said. “In the current situation, we see a very different pattern of response and inventory management, with the percentage differences between revenue and inventory much tighter than during the crisis in 2001 and 2002.”

Gartner maintained that concerns of possible shortages in inventory are premature — although shortages could potentially occur, they will most likely be few and far between, and, given the current end demand, short-lived. Mr. Van Hoy said 2009 remains a negative revenue growth year for the semiconductor market and should be treated as such. Some consumer spending is beginning to occur but is still short of a significant turnaround in the market.

*DASI Index Control Zones:

- Less than 0.90 — a severe shortage of inventory
- 0.90 to 0.95 — a moderate shortage of inventory
- 0.95 to 1.10 — a normal level of inventory
- 1.10 to 1.20 — a moderate surplus of inventory (caution zone)
- More than 1.20 — a severe surplus of inventory

Additional information is available in the Gartner report “Dataquest Insight: Semiconductor Inventory Outlook, 3Q09 Update.” The report is available on Gartner’s Website at

Gartner analysts will provide a detailed analysis on the future of the semiconductor industry at the Gartner Semiconductor Briefing: New Postrecession Fundamentals. The briefing is being held on October 15 at the Double Tree Hotel in San Jose. Additional details, as well as the registration form, are at

About Gartner:
Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit


This news content was configured by WebWire editorial staff. Linking is permitted.

News Release Distribution and Press Release Distribution Services Provided by WebWire.