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October 10, 2011

Semiconductor inventories rise to historic highs

Q2 inventory DOI grew 3.5 days from 79.9 days in the first quarter  

By CBR Staff Writer

Inventories held by semiconductor suppliers in the second quarter of 2011 has risen to historic highs raising concerns over the near-term outlook for the chip market, according to information and analysis provider IHS iSuppli.

A new Inventory Insider report from IHS shows that Days of Inventory (DOI) for all semiconductor suppliers are now at 83.4, at levels not seen since the start of the last downturn in early 2008. The levels continue to grow even as revenue projections for the third quarter continue to be scaled back.

IHS said that the second-quarter inventory DOI grew 3.5 days from 79.9 days in the first quarter. It added that this is the first time in 12 consecutive quarters that DOI has crossed the 80-day mark.

The inventory level in the second quarter was 11% above the historical seasonal average usually recorded for the period, said the report. This is close to the 11.1% oversupply seen in the first quarter of 2008, right at the start of a two-year downturn in the semiconductor industry.

It is estimated that inventory levels will reach an adjustment period soon.

IHS semiconductor analyst Sharon Stiefel said, "For the semiconductor industry, wading into such potentially troubling territory — reminiscent of the dark days leading into the recession — could herald the beginning of a critical inventory adjustment period.

"The correction is likely to take place during the next few quarters and will not be completed until mid-2012. As such, it will involve suppliers making a prolonged reduction in their inventory levels to avoid dangerous oversupply situations."

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