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Intel kills off chip inventories

Industry overkill

The rising crisis of huge inventories of chips going unsold has been averted thanks to surprisingly swift action from Intel but it might have caused a bigger problem.

According to an iSuppli report, analysts were worried about a rise in the global semiconductor inventories in the third quarter of 2012. Days of Inventory (DOI) for semiconductor suppliers in the fourth quarter declined by five per cent compared to the third quarter. This is higher than the 1.5 per cent initial forecast.

Sharon Stiefel, analyst for semiconductor market intelligence at Isuppli said that semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand. While many chip suppliers demonstrated great agility in their reactions to the drop in demand, Intel was the most aggressive.

Chipzilla slashed its stockpiles by more than half a billion dollars—the largest decrease on a dollar basis of any chipmaker. Intel cut its inventory by $585 million from the third quarter, representing an 11 percent reduction. It also reduced production as it migrated to 14-nanometer lithography.

Isuppli said that the fall in inventories was probably a bad sign because they are are expected to rise in response to slightly positive global economic indicators. The fact that Intel has cleaned out its warehouses means that it dies not expect to see major increases in sales in the short term.

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