Global semiconductor levels highest in two and a half years

IHS reports that semiconductor suppliers had 83.6 days of inventory (DOI) at the end of the fourth quarter of 2010, up 5.5 days, or 7%, from 78.1 days in the previous quarter. Inventory was said to be at its highest level since the second quarter of 2008, just before the onset of the last semiconductor downturn, when DOI reached 84 days. Analyst, Sharon Stiefel, said: "Inventory levels arguably now are high by any standard, illustrating the difficulty of controlling chip stockpiles despite the arduous efforts of semiconductor suppliers to keep them in check. The sharp increase during the fourth quarter of semiconductor inventory defied expectations of a decline for the period, but the inflated level of inventory could become a concern if semiconductor industry growth falls short of expectations in 2011." IHS originally predicted a 2.5 DOI decrease in Q4 stockpiles, however, actual results indicate a swing of eight DOI compared to expectations. "With the current IHS iSuppli global semiconductor forecast calling for revenue growth of 5.6% in 2011, following in the wake of a 31.8% increase in 2010, the inventory level at present still should be manageable, assuming that the forecast holds," Stiefel said. However, IHS warns if growth is lower, the high inventories could cause oversupply in the market, causing chip prices to decline faster than normal. This could amplify the size and duration of a downturn or slowdown in the semiconductor market. "Hot segments like smart phones and media tablets continue to generate strong growth for semiconductors," concluded Stiefel. "Furthermore, other segments like the automotive and industrial markets, which tend to get less visibility, also are generating encouraging chip sales."