The Q2 Overview of Semiconductor Industry

IHS’s report says that the days of inventory (DOI) of chip suppliers not including the memory company estimated 80.3 days at the end of the of the first quarter in 2011, up 1.1 percent from 79.4 days in the fourth quarter of 2010 and an increase of 9.1 days from the same period in 2010. This represented a two year high, with inventories reaching a level not seen since the first quarter of 2009, when DOI amounted to 82.4. Generally, DOI in the semiconductor channel has been climbing steadily since the third quarter of 2009, moving in tandem with a rise in inventory value dating back to the first quarter of 2010. Inventory value in the first quarter this year stood at an estimated $26.2 billion. 

  It now appears that it is quite fortunate for manufacturers to increase inventory during the slack season from Q4 of 2010 to Q1 of 2011. Because it just offers a necessary 2-4 weeks buffer cycle to get raw materials and complete the product-making processes.    IHS believes that because the Japan disaster occurred so late in the first quarter, with the quake hitting on March 11, the number of weeks of direct disruption to the supply chain was limited during the first quarter. Another reason is that, the impact of Japan’s earthquake on the second quarter may be less than previously expected. Many semiconductor companies that destructed or affected by the insufficient power supply have resumed normal operations, reducing adverse effects on the semiconductor sales in the second quarter. Other factories suffered serious destructions have moved their manufacturing business to  other plants or external foundries.    However, IHS has also unveiled supply problems ahead despite the inventory increase in the near term.  Stiefel warned us that once internal inventories dwindle, the pipeline may not be replenished quickly enough to meet all of the end demand, creating risks for participants in the supply chain. Therefore,  as the inventory policies are being revisited by the Japan disaster, the supply pressures are still ahead.