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New study details chip glut

Despite optimistic signs for a recovery in the chip industry over the past few days, a recent study shows that a massive semiconductor glut could linger into the middle of next year.

LONDON--Industry leaders and analysts have been seeing optimistic signs for a recovery in the computer chip industry over the past few days. But a new report finds there is still a massive semiconductor glut that could linger into the middle of next year.

Despite efforts to reduce excess inventories left over when the slowing economy reduced orders from computer manufacturers, there is still $8 billion in excess inventory sitting on chip manufacturers' shelves, according to a new report from research company iSuppli.

"While there is a modicum of good news for the personal computer, computing platform and wireless market segments with replenishment ordering for components beginning, we are revising our forecast for worldwide semiconductor revenue this year downward to $147 billion--an annual decline of 28 percent," Greg Sheppard, a vice president at iSuppli, said in a statement.

"We see the market decline hitting bottom in the third quarter with a further 2 percent downward move for revenues from the previous period, with revenue growth up 4 percent from this low level in the last quarter of the year, thanks largely to a traditional seasonal boost from consumer purchases toward the end of the year," he added. "The reason for this gloomy forecast is quite clear--$8 billion in excess inventories continue to put a damper on unit ordering and prices," Sheppard said.

iSuppli said that prices could begin rising in the second half of next year when capital spending upgrades and major infrastructure expansion in China kick in.

Staff writer Matthew Broersma reported from London.