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Analysts warn of risks from weak semiconductor demand

29 Jan 2013

Sluggish hardware demand is causing semiconductor manufacturers to pile up unsold stock at 'worrisome' high levels, according to analysts.

Research firm IHS said that inventory stockpiles climbed to 49.3 percent of total industry revenues last quarter, an indication that supply is outpacing demand and devices are not moving as expected.

The figure is the highest such stockpile the company has recorded in six years and suggests slow hardware sales in much of the IT sector.

Researchers said that the slow sales in the PC market have helped to limit semiconductor purchases by vendors and helped to contribute to stockpiles. IHS also noted that sales over the holiday season failed to live up to expectations.

"Demand for semiconductor devices has typically come from new products that consumers feel compelled to purchase. But going into the holiday season last year, no such new products marshaled enough impetus to overcome consumer fears about lingering economic woes," said IHS semiconductor market analyst Sharon Stiefel.

"Two months prior to Christmas, consumer purchases of electronics had grown by only 0.7 percent, the worst performance since 2008."

The semiconductor market is one of many levels of the IT sector to suffer from dwindling demand as the economic crisis lingers. Researchers have noted that markets including PC vendors and flash memory suppliers have suffered losses and slow sales in 2012.

While IHS expects the market to recover this year with growth as high as nine per cent, should such a recovery not materialise IHS said that semiconductor vendors could be forced to write off their stock and take a financial hit from the unsold hardware.

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Shaun Nichols

Shaun Nichols is the US correspondent for He has been with the company since 2006, originally joining as a news intern at the site's San Francisco offices.

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