EL SEGUNDO, CA – Despite rising 3.4% and hitting an 11-year high in the fourth quarter of 2012, average semiconductor days of inventory held by chip suppliers are expected to decline 0.5% in the first quarter, providing some hope that market conditions are improving, says IHS iSuppli.

Amid slow demand and continued excess production, average global semiconductor stockpiles held by chip suppliers rose to 84.1 DOI in the fourth quarter, up from 81.3 in the third quarter, says the research firm. However, demand is predicted to rise in the first quarter, drawing down stockpiles to 83.7 DOI.

“The fourth quarter of 2011 proved disappointing from both a revenue as well as earnings standpoint,” said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. “Global semiconductor revenue declined by 2.8% compared to the fourth quarter of 2010 as customer orders declined. Meanwhile, semiconductor suppliers struggled to balance their factory utilization levels against the drop in demand, leading to the rise in semiconductor inventories.”

Semiconductor inventories in the fourth quarter of 2011 were at their highest level since the first quarter of 2001. However, there are signs that conditions in the semiconductor market are improving, says the firm.

“Semiconductor suppliers are projecting a resumption of demand in the first quarter,” Stiefel said. “Book-to-bill ratios are reaching parity, and global macroeconomic indicators point to a healthier outlook. These factors are raising optimism among semiconductor suppliers that better days are ahead for the industry.”

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