Analyst: Inventories rise again in 4Q, but not alarmingly

January 11, 2007 – Surplus semiconductor inventories rose 4.9% in 4Q06 to $4.3 billion, ensuring that inventories will stay high in the first quarter of 2007, but the problem appears to not threaten industry growth, according to data from iSuppli Corp.

The increase “does not mark a significant worsening of the surplus inventory situation,” said iSuppli analyst Rosemary Farrell, adding that the impact of the $4.3 billion worth of overage won’t be that great in 2007. A few chip firms have warned about weaker-than-expected 4Q results due in part to inventories, but those warnings are offset by positive news from other companies, according to iSuppli.

Still, it’s noteworthy that inventories were rising during a time of slowing orders in several segments. iSuppli pointed to weakness in 3G wireless handsets and high-end computers, adding to weakness already seen in segments such as networking and wired communications, and overproduction of LCD TVs added to excess stockpiles of related chips during the quarter.

Most stockpiles are concentrated at chip suppliers, but signs point to worsening inventory levels at manufacturing contractors too, and some of that will be pushed back to the chip firms, iSuppli noted.


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