Pacific Crest analyst, Michael McConnell reported this week that rapid deterioration of consumer demand has forced Microsoft to slash its Xbox 360 build plans by 40% for the fourth quarter. 

In his recent report of looming difficulties facing the chip sector, according to the Wall Street Journal, McConnell reported that he has “become alarmed by the rapid pace of deteriorating demand forecasts for Q4, the consistency of these findings throughout every level of the supply chain, and, most important, the magnitude of next quarter’s projected sales declines at semiconductor component vendors, which we believe to be underestimated by investors.”

Along with Microsoft, McConnell has also reported that HP and Acer have both also reduced their build plans.

Read more: http://www.smgamers.com/?p=2135

Source Article: http://blogs.barrons.com/techtraderdaily/2010/09/07/chips-the-streets-worries-intensify-downgrades-piling-up/

This is actually very worrying. What happened to cause such a swift and dramatic shift in the chips sector? It seems pretty widespread too, not just Microsoft. :edit: It should be noted that this could just be cyclical because of a spike in chip demand after the 360S release but it would appear to be deeper and more widespread than that. Also quarter 4 is January-March.

"rapid deterioration of consumer demand"? More 360s are selling now than six months ago. Why would higher demand now make them think they'll have less demand later when there are some many killer games coming out in the next year that will continue to pump up even more demand?

agreed this article makes zero sense

yup, semi-conductors are facing a major slow down over the coming year, at least that seems to be what all of the manufacturers are saying.  Of course Q4 is Jan-Mar which is typically a slower season for manufacturing.  What this really points to is many retailers are anticpating a slow holiday season and chip makers are expecting very slow business spending at the end of the year, which is typically when many companies will upgrade computre equipment. Sony and Nintendo haven't made announcments yet but you can bet they will be pulling back their numbers as well.

Get ready for a bear market, hold some cash, and look to pick up some cheap stocks in about 4 to 6 months.

Read the source article. The issue seems to be widespread across the microchip sector. And it's published by Barrons so I would think it's reputable.

but with kinect, fable 3, Halo Reach, COD Black OPs, Assassins Creed brotherhood and all the other huge games coming out why in heck would demand shrink, especially when 360 is seeing some of the best sales its ever seen right now.

Just doesn't add up is all I'm saying.

This smells a bit like bullshit to me.  Of course there will be a slow down after the Holidays but that is to be expected.  The only thing I can think that would cause this to happen is this.  Microsoft is probably producing as many consoles/chips as their factories can make 24/7.  So eventually the supply will be bigger than the demand.  That will more than likely be after the new year.  And this is only if Kinect does poorly.

Yeah, that would make sense but MS isn't the only company anticipating a major downturn. And the Wall Street Journal thinks they're even underestimating the situation.

you expect COD black ops and assassins creed to push hardware for the 360? You do realize they aren't exclusive..

Of course I do, there is zero chance they won't

They are also going to push PS3 hardware.

You don't sell 4 million units on a system and don't push some hardware.  Thats a fact.