EL SEGUNDO, CA – Component inventories are climbing, but do not present a problem, a leading researcher says.
Midway through the second-quarter, total inventories climbed to $9.6 billion, up 9% sequentially. The seasonal average is 3.2%, says iSuppli. Meanwhile, average days of inventory grew to 73.2 days during the period, up 6%. But the swelling stockpiles are not cause for concern, as demand is expected to increase during the coming months.

The data are compiled by iSuppli from approximately 35 semiconductor component manufacturers.

At semiconductor companies, revenues, profits and gross margins are at record levels, says the research firm. Coupled with positive third-quarter revenue guidance, managers are confident about increasing inventories for the second half.

The quick rise in demand is making it difficult for semiconductor suppliers to restock to pre-recessionary levels. Products shipped are intended to meet current orders, iSuppli has determined, and not meant for placement into inventory.

As such, backlogs are driving many suppliers to increase capacity, although conservative capital spending in the form of targeted equipment buys appears to be the norm. Intel and Samsung are exceptions, the firm says.

Overall, however, the increase in inventory reflects a justifiable build, and iSuppli is not concerned with an inventory bubble. With the market now less volatile, semiconductor companies gradually will be returning to more normal operating conditions and inventory levels over the next few quarters, the firm expects.