LONDON — Market research group Gartner has issued one of its most pessimistic outlooks for several years, suggesting that many OEMs will not increase production of electronic equipment — which they typically would — for the holiday season, in anticipation of weaker demand from consumers.

Gartner warns this will lead to "extreme variations" in the electronic systems supply chain — from ODMs and EMS companies, which make electronic gear for OEMs — to chip packaging and chip foundry companies.

This, in turn, will lead to significantly reduced orders in 4Q08 for chip vendors.

The researchers also caution that many wafers manufactured in 3Q08 will sit as inventory in 4Q08, and further warns that wafer infusion starts in 4Q08 and 1Q09 will be significantly reduced because fabs will be stuck with inventory manufactured before the financial crash.

The speed and intensity of these knock-on effects suggest that the supply chain is planning for reduced demand well into 1Q09, warn analysts Andrew Phillips and Jim Walker of Gartner.

The company notes that in recent days, many companies in the sector have released troubling profit warnings.

For instance market consensus among chip ODMs manufacturing netbook PCs shows that 2008 demand could be lower by up to 20 percent; Taiwanese ODM Compal lowered its 2008 PC production forecast by 10 percent to 29 million units; audio codec supplier Wolfson Microelectronics anticipates 4Q08 revenue to fall 24 percent from 3Q08 revenue estimates; chip manufacturer Linear Technology, which has significant semiconductor distribution revenue, anticipates a sequential decline of up to 20 percent from 3Q08 revenue; and foundry TSMC expects 4Q08 shipments to fall up to 24 percent from 3Q08 results, and already has utilization rates below 75 percent.

However, utilization rates for chip manufacturers overall are likely to be about 85 percent.

Gartner says anecdotal evidence from the Asia/Pacific region and Japan supports the trend for a weak 4Q08 in the semiconductor supply chain, as they account for two-thirds of semiconductor sales worldwide.

The researchers also noted that at the Guangzhou (China) Export Trade Fair earlier this month there were 30 percent fewer European and North American visitors than at the spring event, and they did not place orders. The majority of orders placed at the event were from Brazilian and Russian visitors.

The greatest impact is expected to fall on makers of high-end consumer electronics, such as laptops, LCD TVs, media players and portable navigation devices.