A major semiconductor industry group warned that an economic slowdown could crimp sales of chips used in consumer devices, while Gartner said a global chip glut was worsening.
Despite recording a fourth consecutive record high level of monthly chip sales in October of $US21.9 billion, the Semiconductor Industry Association (SIA) warned that greater dependance on sales of consumer electronics devices such as MP3 music players and digital cameras means the chip industry could face a downturn if an economic slowdown occurs.
The global industry group said recent signs of such an economic slowdown could foretell slower chip growth in coming months. Sales for now, however, remained brisk ahead of the holiday season, the SIA said, with 9.2 per cent growth in October compared to the same time last year. Sales were strongest to Europe. Chip industry sales in the Asia-Pacific during October reached $US10.28 billion, a 10.4 per cent increase year-on-year.
Market researcher, Gartner, said production lines were churning out fewer chips than they could, and that the slowdown reflected an increase in inventory levels similar to 2004, when a glut caused a downturn in the industry.
Specifically, global factory utilisation rates, which measure the amount of chips a factory churns out compared to its total capacity, dropped to 88.6 per cent in the third quarter from 91.2 per cent in the second quarter, while in advanced, 12-inch (30mm) factories, utilisation rates fell to 87.9 per cent in the third quarter, the lowest level since the fourth quarter of 2004, when the rate bottomed at 87.3 per cent, Gartner said.
"So, it is looking more and more as though 2006 is repeating the inventory increase/production cutbacks seen in 2004," Gartner analyst, Bob Johnson, wrote in a report. He predicted companies would slow down on factory expansion going into 2007.