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Market research firm iSuppli is concerned that the stockpiling of semiconductors "could spell trouble" if chip makers made the mistake of overestimating market growth. Semiconductor suppliers are currently holding onto 83.6 days of inventory (DOI), the highest level in two and a half years. The last time inventories were this high, it preceded a semiconductor downturn, and iSuppli warns it could happen again.
"Inventory levels arguably now are high by any standard, illustrating the difficulty of controlling chip stockpiles even with semiconductor suppliers' arduous efforts to keep them in check," said Sharon Stifel, analyst, semiconductor market intelligence, at IHS. "The sharp increase of semiconductor inventory during the fourth quarter defied expectations of a decline for the period. This inflated level of inventory could become a concern if semiconductor industry growth falls short of expectations in 2011."
Pointing out the obvious, iSuppli says if growth is low, all this stockpiling could cause an oversupply in the market and drive prices down much faster than normal.
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