Intel leads surprise inventory decline

"Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS, in a statement. "Many chip suppliers demonstrated great agility in their reactions to the drop in demand. No. 1 semiconductor supplier Intel Corp. was the most aggressive, cutting its stockpiles by more than half a billion dollars—the largest decrease on a dollar basis of any chipmaker."

Days of inventory (DOI) held by chip suppliers decreased by 5 percent in the fourth quarter compared to the third. IHS’s inventory supply report had predicted inventories would decline by 1.5 percent. Inventory value in dollar terms fell almost 5 percent, larger than the originally projected 3 percent, IHS said.

Some companies, however, increased inventories over the same period, IHS said. But the increase in inventories at these companies was generally smaller—between $40 million and $250 million.

Intel (Santa Clara, Calif.) decreased its inventory stockpile by $585 million during the fourth quarter, or about 11 percent, IHS said. Intel made aggressive moves to cut stockpiles and reduced production as it migrated to 14-nm process technology, IHS said.

Qualcomm bucks trend
AMD cut its inventory by $182 million, or about 25 percent, while STMicroelectronics slashed its inventory by $131 million, or about 9 percent, IHS said. In the case of AMD, inventory shrank for its microprocessors as a result of an amended wafer supply agreement with GlobalFoundries for reduced stockpiles, IHS said. ST cut utilization rates after exiting its money-losing joint venture with Ericsson, IHS said.

Two other chip suppliers had notable inventory drawdowns: Texas Instruments, down $91 million or 5 percent, due to weak end-market demand for its chips; and ON Semiconductor, down $63 million or 10 percent, as it burned bridge inventory and coped with reduced revenue, IHS said.

Among inventory gainers, most faulted low seasonality and an uncertain global economy for a rise in chip stockpiles, IHS said. Companies in this group included MediaTek, up $58 million or 14 percent; NXP Semiconductors, up $44 million or 7 percent; and Infineon Technologies, up $43 million or 6 percent, according to IHS.

Only one company that increased inventory did so because of related strong performance, IHS said. Qualcomm Inc. increased its inventory levels by $247 million, or about 24 percent, due to strong market acceptance of its wireless chips in products like the Apple iPhone and iPad, IHS said. Qualcomm is ramping up production and inventories in order to meet increased demand, IHS said.