John Daane, in an interview with EE Times, said "Companies don't want to take a risk and add inventory. It's compounded with the fact that many OEMs have moved their manufacturing out to contract manufacturers. And contract manufacturers aren't willing to take the risk anymore."

Daane's comments at the Globalpress Summit 2004 here came a day after UMC CEO Jackson Hu told journalists that his company's foundry capacity will be fully utilized this quarter. Meanwhile, other chip companies like Xilinx said they are concerned about foundry capacity.

"What's going to happen is one day everyone's going to wake up and realize lead times have extended on everybody's products and there's nothing to be had, and they're going to hit the wall after running at 90 miles per hour," Daane said. "You're going to see a sharper increase in your bookings as people scramble to get anything they can to fulfill their orders. So I think this cycle is actually more dangerous because of the emotional damage that's been done."

Daane said he's seeing tighter capacity across all geometries, and Altera, both internally and with its distributors, has increased its inventory position in the past quarter with another increased set for this quarter.

"The danger is very high that you're going to see a component shortage and some OEMs have trouble shipping products," he added.

Altera is not shopping for additional capacity at the moment, he said.

To view the recent View from C-Level interview with Daane, click here.