Inventory Glut Has Just Begun
Semiconductor research firm iSuppli has said that third-quarter inventories remain high. According to Tom’s Hardware Guide:
Semiconductor inventories remained high in the third quarter, according to market firm iSuppli. Inventories for global electronic companies, including AMD and Intel, are hovering at $3.9 billion dollars and could linger on until after the holiday season.AMD and Intel are experiencing supply overages, despite a bevy of model processor models. iSuppli predicts that inventories should decrease early next year from users upgrading computers in anticipation of Windows Vista.
The thing is, all of that excess manufacturing capacity we’ve been talking about is just now starting to get installed (we track growth in orders as a leading indicator.) So far from remaining high – we think the pileup is in its early stages.
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[...] Sure. The only thing is, what makes them so sure that inventories have peaked? As we have mentioned once or twice (oh, what the hell – we’ve said it a lot), semiconductor equipment orders have been enormous. Do they think that equipment, once installed, won’t be put to use manufacturing more semiconductors? [...]
[...] Our readers are quite familiar with our concern that excessive capacity additions are going to make an already bad inventory situation even worse. Texas Instruments CEO Rich Templeton begs to differ – MarketWatch: The semiconductor industry doesn’t appear to have a serious problem with excess inventory, Texas Instruments Inc. (TXN - Annual Report) Chief Executive Rich Templeton said Tuesday. “I don’t think we have an inventory situation that’s out of control compared to what we’ve seen in the past,” Templeton said at a Credit Suisse conference for investors. He said many customers are comfortable with trimmer inventories, meaning they reorder more slowly knowing they can get additional chips from suppliers if needed. [...]