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IC inventories head up, but don’t worry, says iSuppli
El Segundo, Calif. — Chip suppliers are reporting rising inventory levels, but market research firm iSuppli Corp. says there is no cause for concern with demand expected to increase during the upcoming months.
Midway through the second-quarter reporting period, total chip inventory among the approximately 35 semiconductor component manufacturers tracked by iSuppli climbed to $9.6 billion, up 9 percent from $8.9 billion in the first quarter, which is faster than the seasonal average of 3.2 percent.
The iSuppli report, “Inventories Are Rising but Do Not Raise an Alarm Yet,” reveals that average days of inventory (DOI) also tracked upward, increasing by about four days during the period to 73.2 days, up 6 percent from 69.3 days, which is a rate slower than the historical DOI seasonal increase of 9.6 percent, or 6 days, reported iSuppli.
iSuppli analysts said these indicators, along with positive revenue guidance for the third quarter, are providing managers with the confidence needed to increase inventories for the second half of the year.
“Across the semiconductor market, management comments in earnings announcements have been extremely positive, citing strong results in various end applications and geographies,” said Sharon Stiefel semiconductor manufacturing researcher for iSuppli, in a statement. “The solid second-quarter results — based on higher-than-usual seasonal revenues, favorable average selling prices (ASPs) and innovative new products — are allowing companies to finally relax their vice grip on inventories.”
Semiconductor suppliers are finding it difficult to restock to pre-recessionary levels, said iSuppli, and products being shipped are intended to meet current orders, not for placement into inventory.
As a result, the current backlog is driving many semiconductor suppliers to increase capacity, although conservative capital spending appears to be the norm such as investing in equipment to relieve constriction points in production, said iSuppli. The exceptions to the rule are the large corporations such as Intel Corp. and Samsung Electronics Co. Ltd. with enough cash to invest.
iSuppli believes the increase in inventory is a justifiable build and with a less volatile market, semiconductor companies gradually will be returning to more normal operating conditions and inventory levels over the next few quarters.
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