Chip inventories are low

Staff -- Purchasing, 10/20/2005

Semiconductor inventory levels are at healthy levels globally with no indication of a buildup of excess stockpiles. However, whether stockpiles stay at healthy levels will depend on fourth quarter end equipment demand.

At the beginning of the third quarter, excess semiconductor inventories in the supply chain were down more than 25% compared to the same period in 2004, according to researcher iSuppli. Semiconductor suppliers are holding 88% of the total excess inventory in the supply chain.

Chip companies are increasing production to meet what they expect will be strong fourth quarter demand. Orders were weak in June and improved in August and September. However, if fourth quarter demand doesn't grow as much as chip companies expect, inventory levels will rise throughout the supply chain.

So far that has not happened. There is no sign of a build of inventories at distributors. In fact, semiconductor suppliers report that distributor inventories are low.