Semiconductor Inventory Already High, Just Wait for the New Capacity
iSuppli: Semiconductor inventories elevated, but remains under control
Although excess semiconductor inventories in the electronics supply chain are expected to swell by 11% on quarter to US$1.3 billion by the end of the second quarter, research firm iSuppli believes that stockpiles aren’t large enough to raise alarms.Inventories remain within expectations and are manageable, iSuppli said. The current expansion in surplus stockpiles appears to be restricted to the PC supply chain. No major expansion in excess inventory is expected in the third quarter.
Really? We have been harping for months that semiconductor manufacturers are ordering equipment at far faster rates than can be supported by end demand. This equipment is used to make semiconductors. If the semiconductors are not sold, they will be inventory. So score us in the camp of expecting a major expansion in excess inventory in the third quarter.
However, almost all semiconductor suppliers that provided comments on expectations at the beginning of the second quarter said they expect to meet their sales forecasts.
Duh. That is why those were their forecasts.
iSuppli indicated that overall excess inventories in the supply chain edged upward to US$1.3 billion. This number reflects updated inputs from companies whose fiscal quarter ends in April.
Lack of demand is always a concern for the electronics supply chain, especially in the second half of the year. This concern is heightened amid the present uncertain macroeconomic environment.
Inventories now are higher than they were at the midpoint of 2004, iSuppli stated. At the time, semiconductor suppliers became overloaded with excess stockpiles that were pushed back up the chain after increased production in the first half of that year forced an inventory correction. The push back in semiconductor stockpiles occurred after second-half demand failed to materialize. It took a year to work down the overhang.
That’s what we’ve been talking about, Willis.
Disclosure: William Trent has a long position in SMH.
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