Alarm research on inventories of Chip

Global Semiconductor inventories have risen to the highest level in two-and-a-half-years in just about where they were before the beginning of the last recession chip market researcher iSuppli, IHS has warned on Wednesday.

High inventories will become a great concern if it slows the growth of sales in chips.

"If growth is low, inventories of senior could cause excess supply on the market, causing prices to chip to fall faster than normal," wrote Sharon Stiefel, IHS chip analyst iSuppli, in the report. "This could amplify the size and duration of a recession or slowdown in the semiconductor market," he said.

Chip inflections and the resulting declines in chip prices hurt business, but are good for consumers, as chips are often the most expensive part of a gadget.

IHS iSuppli, which tracks global chip inventories as a way to determine when the boom-bust cycle of industry is reaching its peaks and valleys, said in a report which vendors required 83.6 days of inventory at the end of last year, the highest level since second quarter of 2008, when inventories hit 84 days and marked a peak before the market fell to chip. In general, the chip industry when inventory days peaks rise above 80 and caps when inventory drops below 70 days, according to iSuppli IHS.

Stiefel "now probably inventory levels are high by any standard," he wrote. "The significant increase in inventory of semiconductors during the fourth quarter earnings defied the expectations of a decline for the period".

IHS iSuppli predicts chip industry revenue to grow 5.6% this year. Last year, chip revenue grew a whopping 31.8 percent as company rebuilt inventories decimated by global economic turbulence in 2009 and how consumers snapped most Smartphones, tablets and other gadgets.

Global chip industry has been plagued by a regular cycle of boom-bust caused in part by the massive investments needed for new chip factories. Factories of chip state-of-the-art cost billions of dollars, and most companies to invest in new factories at the same time. Often these plants come online around the same time, resulting in an excess of new supply.

But since the companies have borrowed so much money to build new factories, cannot simply mothball production lines and wait for the overabundance of facilitate. They have to sell as many chips as possible to keep the cash coming so that they can repay the loans.

A glut of DRAM sent the prices of memory chips important spiralling last year. On DRAMeXchange, who runs an online clearinghouse for chip, believes that DRAM prices finally bottomed in early February, after a decline of 50% in the fourth quarter.