Inventory turnover indicates how often a company is replacing its inventory of products. A high inventory turnover signifies efficient inventory management, high sales, or insufficient inventory. Conversely, a low turnover ratio indicates excess inventory or weak sales; this results in money being tied up in inventory instead of being available e.g. for investment, dividends, and debt repayment.

After a relatively steady inventory ratio over the past few years, in 2018 average inventory turnover ratio for semiconductor companies saw a marked decline – 4.3% YoY. Consequently, semiconductor pricing came under pressure.

This year, the semiconductor inventory turnover ratio has seen its lowest level since the heady days of 2016.  The first and second quarters of 2019 saw a sequential QoQ drop of 4.2% and 3.4%. The second half of the year is set to experience a less dramatic decline with our algorithms predicting a 0.4% QoQ decline in Q3 and 1.4% for Q4. For the full year, our algorithms estimate a 7.6% YoY drop.

Overall, weakened semiconductor inventory ratios can be attributed to a drop in hyperscale data center capex, slower growth in exabyte shipments for enterprise storage, and a lack of meaningful innovation in smartphones spurring sales.

We anticipate a continued decline in inventory turnover for the first half of 2020. This will stabilize in the second half as we predict a bounce back in data center capex, new investment in 5G infrastructure, and a ramp-up in 5G smartphones sales.  This trend will continue through into early 2021.

 

Big Data Federation, Inc. is an AI-driven financial technology company which develops and applies innovative machine-learning algorithm to big data to predict financial and economic fundamentals metrics. We comprise a group of technologists, mathematicians, data scientists, economists, and programmers in the Silicon Valley and Europe. The company was incorporated in 2015 and is headquartered in Santa Clara, California with a satellite engineering office in Chișinău, Moldova.