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Semiconductor Inventory Levels Increase throughout Supply Chain

Buyers can expect lead time stability for many semiconductors as chip suppliers continue to increase inventory levels.

Semiconductor inventory levels continue to rise as chip suppliers, distributors, electronics manufacturing services providers, and OEMshaveall boosted chip stockpiles. Semiconductor stockpiles are expected to continue to rise through the year.

The total inventory level for semiconductor suppliers, except for memoryIC manufacturers, was expected to be 81.5 days for the second quarter, according to researcher IHS iSuppli, based in El Segundo, Calif. This figure is up 1.5 percent from 80.3 days in the first quarter.

Semiconductor inventory levels have increased every quarter since the fourth quarter of 2009.

Chip suppliers are continuing to rebuild depleted inventories following the capacity crunch of 2010 that led to shortages, said Sharon Stiefel, analyst for semiconductor intelligence at IHS iSuppli.

Stiefel added that chip suppliers also are building stockpiles for expected stronger demand later this year.

"In a fortuitous stroke of good timing, semiconductor component manufacturers were able to take advantage of the reduced demand environment during the seasonally slow first quarter to build their stockpiles," Stiefel said.

Inventory levels are not just rising at chip companies. Semiconductor stockpiles throughout the electronics supply chain, including distributors, contract manufacturers, and original equipment manufacturers (OEM), except computer companies, grew during the first quarter.

Computer OEM inventories declined more than eight percent, most likely because they shipped most of their products to retail outlets for restocking following the busy holiday season in the fourth quarter of 2010, reported IHS iSuppli.

In comparison, memory and analog companies had the highest percentage increases in their internal inventory, with growth of almost fifteen percent, while fabless companies and distributors experienced modest increases.

Semiconductor inventories are likely to continue rising throughout 2011. Growth will be stimulated by market demand for smartphones, media tablets, and PCs.

The Japan earthquake in March will have a minimal effect on overall inventories throughout the electronics supply chain, according to IHS iSuppli.