Analysts: Inventory seems to be at sweet spot

by Matt Wickenheiser, Contributing Editor

Analysts interviewed by WaferNEWS indicated the industry seems to be in a fairly good situation with regards to overall inventory levels heading into the holiday season.

“I think inventory levels rose slightly in expectation of a strong back half, and that we dampened the sales pretty quickly as soon as we got concerns” about end market demand and the overall economy,” said Doug Freedman, senior analyst at American Technology Research. In fact, “there might be spot shortages at the end of the year,” he predicted.

Gartner Dataquest Research noted a tick up in semiconductor supply chain inventory in both 1Q and 2Q, but that it’s still only about 10% above the ideal level and “therefore not a problem at this stage,” said Richard Gordon, managing VP for semiconductors. “We believe that semiconductor vendors remain very sensitive to increases in inventory in the channel and will likely moderate output in order to bring inventories back under control, as they did in 2004 when the same trend was observed,” said Gordon.

Freedman said he wouldn’t be surprised if there’s a slightly stronger than expected first quarter, with inventory restocking and requests from OEM partners to carry more buffer stock. “If you talk to semi companies they may tell you it’s leaner than they’re comfortable with,” he said. Chipmakers’ efforts to moderate output and keep inventories down “will be especially important ahead of the seasonally weak 1Q,” said Gordon, “to ensure that sequential semiconductor sales revenue growth does not decline too dramatically from 4Q to 1Q as demand weakens.” — M.W.


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