Friday, February 18, 2011
Global inventories held by semiconductor suppliers surged to their highest level in two-and-a-half years during the fourth quarter of 2010, a development that could spell trouble if chip industry growth loses steam this year, according to a new report by market research firm IHS iSuppli.
Semiconductor suppliers had 83.6 days of inventory (DOI) at the end of the fourth quarter of 2010, up a surprising 5.5 days, or 7 percent, from 78.1 days in the previous quarter, according to IHS. Inventory was at its highest level since the second quarter of 2008—right before the onset of the last semiconductor downturn—when DOI reached 84 days, the firm said.
"Inventory levels arguably now are high by any standard, illustrating the difficulty of controlling chip stockpiles even with semiconductor suppliers’ arduous efforts to keep them in check," said Sharon Stiefel, a semiconductor market intelligence analyst at IHS.
 Stiefel said the sharp increase in semiconductor inventories in the fourth quarter defied expectations of a decline for the period. "This inflated level of inventory could become a concern if semiconductor industry growth falls short of expectations in 2011," Stiefel said.
IHS iSuppli forecasts had predicted stockpiles would decrease by 2.5 DOI in the fourth quarter. The firm's current forecast calls for semiconductor revenue growth of 5.6 percent in 2011 compared to 2010. Assuming that forecast holds, the current inventory level should be manageable, IHS said.
But the firm cautioned that if chip growth falls short of its forecast the high inventories could cause oversupply in the market, pushing chip prices to decline faster than normal. This could amplify the size and duration of a downturn or slowdown in the semiconductor market, IHS said.
According to HIS, hot segments like smartphones and media tablets continue to generate strong growth for semiconductors. Other less visible segments, like the automotive and industrial markets, are also generating encouraging chip sales, the firm said.
By: DocMemory
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