Excessive inventory absorbs impact of Japanese disaster

10 08 2011

Even though it would normally be considered a negative sign, excessive industry served as a real boost for the global semiconductor industry in the first quarter of this year.

The level of inventory helped to alleviate the damage done by the Japanese earthquake which hit the country, and the electronics industry, so hard in February of this year.

The shortage of basic components such as semiconductors was not nearly as bad as it could have been.

The statistics show that the days of inventory (DOI) among chip suppliers stood at an estimated 80.3 days at the end of the first quarter in 2011. This was up by 1.1% from the 79.4 days in the final quarter of 2010, and it was also an increase of 9.1 days from the same period in 2010.

In total, this represented a 2 year high, with inventories reaching a level not seen since the first quarter of 2009.

“Efforts by suppliers to build inventory during the seasonally slow period from the fourth quarter of 2010 through the first quarter of 2011 proved to be fortuitous,” according to Sharon Stiefel, analyst for semiconductor market intelligence at IHS isuppli.

“These efforts resulted in a two-four week cushion of raw materials, work-in process goods and finished products, which came in handy when chip supplies were disrupted by the Japan disaster.

While a large inventory overhang can be a negative development for the semiconductor industry – fuelling excess supply, dampening pricing and reducing profits – it turned out to be a positive factor during the first quarter as the industry contended with supply shortages,” added Stiefel.

When the earthquake hit Japan on the 11th of March, the effects were obviously devastating for the country as a whole.

For the electronics industry specifically, the long term damage could have been particularly bad given the amount of equipment such as connectors and components which the country produces.

For further details on semiconductors, visit www.challengercomponents.com




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