Rising chip inventories spell trouble if sales stall

February 18, 2011 – Global stockpiles of semiconductors rose to a two-year high in 4Q10 instead of an anticipated slowdown, a situation that could get messy if predictions of 2011 sales growth don’t materialize, warns IHS iSuppli.

As of 4Q10, globally semiconductor suppliers held 83.6 days-of-inventory (DOI), up 5.5 days (7%) from the previous quarter, the highest since 2Q08 right before the market (and global economic) downturn. IHS iSuppli had expected a 2.5 DOI decrease — which means an ~8 DOI swing. "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," notes Sharon Stiefel, IHG analyst for semiconductor market intelligence, in a statement.

If the semiconductor industry keeps to IHS iSuppli’s prediction of 5.6% growth in 2011 (following >30% in 2010), rising inventory levels should be manageable, notes Stiefel. Slower growth than that, plus inflated inventory levels, could create an oversupply situation, push down prices, and amplify/extend another market slowdown.

Click to Enlarge
Average days-of-inventory (DOI) held by semiconductor
suppliers worldwide. (Source: IHS iSuppli)



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