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Slow gadget sales lead to chip glut

Gartner warns of rising chip inventories

Global inventories of semiconductors spiked in the fourth quarter due to lacklustre fourth-quarter gadget sales and lower expectations for sales in the first quarter, according to Gartner.

The market researcher's chip inventory index rose to 1.16 in the fourth quarter, compared to 1.04 in the third quarter of last year. The figure is designed to assess normal chip inventory levels throughout the global technology supply chain.

The report comes amid growing worries over the health of the US and global economies. Last Friday, the US Labor Department said employers cut 63,000 jobs in February, the second straight month of declines. Some analysts interpreted the data as proof that the US is in a recession.

For the global technology industry, a US recession could send demand for electronics products into a decline, especially if economic troubles spread to other countries.

Gartner's inventory report highlights potential problems in the chip industry. Rising inventories are a sign orders are falling or being cancelled, and that chip makers need to slow production to stave off a glut.

Chip makers should reduce inventories as a cautionary measure against further troubling economic and financial news, Gartner said. The company expects its inventory index to remain in the "caution zone" in the first quarter of this year and possibly the second quarter, according to Gerald Van Hoy, analyst at Gartner, in the company's Semiconductor DQ Monday Report.


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