Electronics Production | August 04, 2009
2Q-Results reveal healthy inventory positions for major chip suppliers
Most major global semiconductor suppliers that have reported second-quarter results are currently holding lean levels of chip inventory, putting them in a strong competitive position as demand begins to recover, according to iSuppli.
Of 15 companies that have reported second-quarter results, 11 indicated that their Days of Inventory (DOI) during the period were at a lower level compared to their average level for the past three years. Eight of the companies reported inventories lower than the average by double-digit percentages. “The latest results from semiconductor suppliers validate iSuppli’s assertion that inventories have been reduced to appropriate levels, down from previously excessive positions,” said Carlo Ciriello, financial analyst for iSuppli. “Inventory levels are lean—but appropriate—given current revenue levels. With fab utilization so low, semiconductor suppliers can ramp up production to build inventories to meet increased demand, should it be necessary.” With inventories having been excessive in recent times, companies with DOI of 10% or more less than their trailing three-year average are in optimal competitive positions, having adjusted for the new supply and demand equation brought by the dramatically smaller end markets. With annual chip demand expected to peak in the third quarter to be followed by a decline sequentially in the fourth quarter, the present quarter represents the best—and possibly last chance—for managers to cut inventories in order to meet new equilibrium levels. The attached figure presents second-quarter DOI for 15 semiconductor suppliers that have reported results for the period compared to their respective trailing three-year DOI averages. No second-half snap-back for inventories The world’s leading chip supplier, Intel, in the second quarter held DOI 19% below its three-year average. Other companies running notably lean inventories included Texas Instruments at negative 10%, Qualcomm at minus 25%, Advanced Micro Devices (AMD) at minus 25%, Micron Technology at negative 23%, NXP at minus 19% and Xilinx at negative 19%. Significantly, companies reporting second-quarter results indicated that there is no major inventory build in the offing. Intel described its current levels as being “in very good shape,” while Qualcomm has said the inventory contraction “has now stabilized.” AMD said it is “pleased with our current inventory position.” “Many semiconductor suppliers are anxious about expected demand levels in the fourth quarter, following the conclusion of the peak third-quarter buying season,” Mr Ciriello said. “Because of this concern, they are being cautious about rebuilding inventories beyond what future demand can justify.” Image source: AMD
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