Excess Chip Inventory Keeps Growing

According to iSuppli, that Excess chip inventory keeps growing and growing.

Surplus semiconductor inventories in the global electronics supply chain rose again in the fourth quarter of 2006, meaning that excess stockpiles are likely to linger through 2007, iSuppli predicts. 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.”

We find it difficult to reconcile that forecast with the excess capacity still coming on line.