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Gartner sees dimming future for OEMs

Posted: 30 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:IC outlook? OEM chip vendor? foundry?

Gartner Inc. has issued one of its most pessimistic outlooks for the years to come, saying that many OEMs will not have boost in production of electronic equipment, which they typically would for the holiday season, because of weaker demand from consumers.

The group warns this will lead to "extreme variations" in the electronic systems' supply chain, from ODMs and electronics manufacturing services firms, which make electronic gear for OEMs and to chip packaging and chip foundry companies.

It said this will eventually lead to significantly low orders in Q4 08 for chip vendors.

The researchers also caution that many wafers manufactured in 3Q 08 will sit as inventory in Q4 08, and claim that wafer infusion starting in Q4 08 and Q1 09 will be significantly reduced because fabs will be stuck with inventory manufactured before the financial crash.

Low demand continues
"The speed and intensity of these knock-on effects suggest that the supply chain expects for reduced demand well into Q1 09," said Andrew Phillips and Jim Walker, analysts of Gartner.

The company noted that in recent days, many companies in the sector have released troubling profit warnings.

For instance, market consensus among chip ODMs manufacturing netbook PCs shows that 2008 demand could be lower by up to 20 percent. Taiwan ODM Compal Electronics Inc. lowered its 2008 PC production forecast by 10 percent to 29 million units. Audio codec supplier Wolfson Microelectronics anticipates Q4 08 revenue to decline 24 percent from Q3 08 revenue estimates. Chip manufacturer Linear Technology, which has significant IC distribution revenue, sees a sequential decline of up to 20 percent from Q3 08 revenue. Meanwhile, foundry TSMC expects Q4 08 shipments to fall up to 24 percent from Q3 08 results, and already has utilization rates below 75 percent.

However, utilization rates for chip manufacturers overall are likely to be around 85 percent.

Foreseen fate
Gartner said anecdotal evidence from the Asia-Pacific and Japan supports the trend for a weak Q4 08 in the IC supply chain, as they account for two-thirds of semi sales worldwide.

The researchers also noted that at the Guangzhou, China, Export Trade Fair earlier this month, there were 30 percent fewer European and North American visitors than at the spring event, and they did not place orders. The majority of orders placed at the event were from Brazilian and Russian visitors.

The greatest impact is expected to fall on makers of high-end consumer electronics, such as laptops, LCD TVs, media players and portable navigation devices.

- John Walko
EE Times Europe

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