Amid signs of a seasonal slowdown in the semiconductor market, excess chip inventories continued to swell in the fourth quarter of 2006, leaving the industry with a surplus of parts worth $4.3 billion, according to iSuppli Corp. (El Segundo, Calif.)
iSuppli's inventory analyst, Rosemary Farrell, said the excess "does not mark a significant worsening of the surplus inventory situation," and is unlikely to stunt market growth in 2007, even though weak end-markets will result in a slow burn-off.
Inventories began rising mid-year, and reached $4.1 billion by the end of the third quarter of 2006. By the fourth quarter, slowing orders for semiconductors for 3G wireless handsets and high-end computers further weakened a market already dampened by sluggishness in parts of the networking and telecom segment. Overproduction of LCD televisions piled on more excess chips.
Most of the overage is concentrated at semiconductor suppliers, Farrell said, but there are signs of a growing inventory problem at EMS providers.
Despite this, iSuppli maintains that the situation is not a cause for major concern. The positive results at some companies will offset the negatives, the research firm stated.