Handset OEMs have lean inventories, says iSuppli

El Segundo, Calif. — Global inventories at mobile handset OEMs are currently at 75 million units, which indicates that the wireless supply chain has reduced its stockpiles to the appropriate supply/demand level, according to market researcher iSuppli Corp.

iSuppli projects that the global mobile handset unit shipments in 2009 will decline to 1.1 billion units, down 12 percent from 1.3 billion in 2008. Annual revenue is forecast to fall 18 percent from 2008.

iSuppli says on a dollar basis, handset inventories declined to $6.2 billion by the end of the first quarter, down from the recent high of $8.6 billion in the third quarter of 2008.

Handset stockpiles amounted to 30 days of inventory (DOI) at the end of the first quarter, which means inventories were slightly lean compared to normal levels, which is a proper level based on revenues and the weak macro-economic conditions, says iSuppli
However, there are always risks with lean inventories, says iSuppli. OEMs will be less capable of capitalizing on a significant increase in demand if there is a surprise upside, said Carlo Ciriello, analyst, financial services at iSuppli, in a statement.

iSuppli expects OEM inventories to remain lean in the second quarter, as mobile handset industry revenue growth remains flat during the period. In the third quarter, iSuppli forecasts the mobile handset market will return to growth, with a 7.8 percent sequential increase in revenue, causing inventories to rise slightly, by about 5 percent, and keeping DOI near 30.

For the fourth quarter, iSuppli forecasts mobile handset revenue will rise by 8.1 percent but inventory will decline by 1.5 percent as the market enters a seasonally slow quarter, keeping DOI below 30.