Semiconductor Inventories Reach $2 Billion In 2Q
According to iSuppli's ‘Semiconductor Inventory Tracker' service the $2 billion excess is at the highest level since reaching $1.6 billion in the third quarter of 2004. At that time the market research firm rang the alarm bells, which triggered capacity reductions throughout the industry.
However, iSuppli is only slightly concerned with the rising inventories this time as the broad-based supply glut of semiconductors in 2004 is markedly different from the build up over the last few quarters.
"Excess inventories have exceeded the worrying levels seen during the last semiconductor supply snafu in mid 2004. However, with most of the excess inventory restricted to PC- related chips, and mainly to a single supplier—Intel Corp.—the surplus stockpiles are not a major concern for the global electronics industry," said Rosemary Farrell, an iSuppli analyst.
Intel's inventory problem was the major factor driving up semiconductor stockpiles among chip suppliers, according to iSuppli. In the second quarter chip suppliers are holding on average eight days of excess stock, up from 6.8 days in the first quarter but mainly isolated to microprocessors and chipsets and in particular Intel Corp.
"With more reductions expected from Intel and AMD, customers have been placing smaller, more-frequent orders than normal in order to delay volume buys until they can get the best pricing," Farrell said. "Because of this, inventory will remain in Intel and AMD's hands for a longer period than usual."
According to iSuppli, Intel's bloated inventory levels will begin to decline in the third quarter, however a surplus will carry-through into 2007.
The market research firm reiterated that there is little industry wide cause for concern in respect for a downturn in the second half period due to the chip glut, especially when other IC devices are in balance or entering a period of short supply.
SOURCE: iSuppli