Excess chip inventory growing

Total excess chip inventory swelled to US$4.3 billion in the fourth quarter, up 4.9% from US$4.1 billion at the end of the third quarter, according to a preliminary estimate from iSuppli.

"The 4.9% increase in excess semiconductor stockpiles conforms to iSuppli's forecast, and does not mark a significant worsening of the surplus inventory situation," said Rosemary Farrell, analyst with iSuppli. "While rising levels of excess inventory are a concern for the global semiconductor industry in 2007, they are not sufficient to derail market growth."

Although US$4.3 billion appears to be a worrying total, the impact of the overage on the semiconductor industry will not be that great in 2007. If the excess inventory were taken out of the equation, the semiconductor market would experience only a 1-2 percentage-point increase in growth in 2007 compared to iSuppli's present forecast of a 10.6% expansion in global chip sales for the year.