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NEWS UPDATES Asean Affairs     17 October  2011

Recession hitting semiconductor field

The inventory of global chip suppliers and a low book-to-bill ratio have reached an alarming level that will have severe worldwide repercussions and impact on chip producers and semiconductor equipment manufacturers in Malaysia.

The latest Colorado-based IHS iSuppli Inventory Insider inventory report published in early October revealed that the inventory of global chip suppliers had now reached 81.3 days of inventory (DOI), a very unhealthy level.

In the second quarter of 2011, the DOI reached 83.4 days, exceeding the last record high of 83.1 days seen in the first quarter of 2008 at the start of the worldwide downturn.

The IHS iSuppli report said the inventory levels raised “concerns over the near-term outlook for the chip market.”

The Connecticut-based Gartner research house also said that the DOI of semiconductors were at “worrisome levels given current conditions” and that the industry would undergo a moderate inventory correction during the next few quarters, which would lower demand for semiconductor production in the second half of 2011 and early 2012.

According to the San Jose-based SEMI, the global industry association serving the manufacturing supply chain for the micro and nano-electronics industries, the book-to-bill ratio of North America-based manufacturers of semiconductor equipment in August was 0.8, down from 0.85 in July.

A book-to-bill ratio of above 1 indicates that more orders are received than filled, and hence a strong market where demand outpaces supply. Similarly, a book-to-bill ratio of below 1 points to weaker demand.

Mini-Circuits Technologies (Malaysia) Sdn Bhd chairman and president Datuk Seri Kelvin Kiew said for chip manufacturers the normal DOI would be around 30-45 days.

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