The channel faces further uncertainty in the chip market as the US semiconductor industry's book-to-bill ratio, a market indicator, reported a record low, confirming the slump in demand.
The book-to-bill ratio, a measure of the value of chips sold against new orders, fell to 0.8 from February's figure of 0.89, the lowest since 1987 when the system was set up.
Problems set in at the end of last year. Jeremy Davies, senior partner at market research firm Context, said: 'Sales were less than expected at Christmas so everybody has found that stock has really piled up. There are a lot of machines which aren't moving anyway, such as 486s and P75s, because demand has fallen away.' He said that vendors such as Digital and Intel were forced to lower sales forecasts in March, and Digital has also announced its intention to quit the consumer market.
Market research company Dataquest has cut growth forecasts for the year from 25 per cent down to 12 per cent.
The slide has hit chip vendor AMD, which last week announced a 70 per cent drop in first-quarter earnings - lower than Wall Street expected despite profit warnings. It recorded an operating loss of $22 million after charges against an operating profit of $122 million for the first quarter of 1995. Sales fell by 13 per cent to $368.5 million.
AMD was cautious about making any projections about the future because 'the industry-wide downturn has made prospects problematic'.
But one firm was happy. Peter King, sales director at PST Trading, which deals in buying overstock, said: 'Chip vendors are facing the same sort of problem as butchers with beef - they have unwanted product on their hands, so the prices are falling.
'People are so cautious about the market that they won't even commit to a deal two days ahead, even if it's a good deal at the time, as they know prices will probably fall. But business is buoyant for us.'
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