Despite a constructive digesting of inventories in the first quarter, chipmakers should remain cautious about production this year to avoid a repetition of the oversupply nightmare they experienced last year, iSuppli Corp said in a statement released on Tuesday.
"The worldwide electronics industry in the first quarter reduced its excess semiconductor inventories at a rate that was dramatically faster than expected, sending a positive signal for future chip-market growth," iSuppli said.
The value of surplus chip stockpiles in the electronics supply chain plunged to US$500 million in the first quarter, down 51.5 percent from US$1.03 billion in the fourth quarter of last year, which greatly exceeded the previous prediction of a decline of 24 percent to US$780 million, according to iSuppli data.
"The reduction of excess semiconductor inventory in the historically slow first quarter of the year is undeniably a positive development for the global chip industry," said Rosemary Farrell, an analyst at the California-based research house.
Farrell said that most companies in the electronics supply chain expected to burn off oversupply by the end of the second quarter, and a number of firms had even said they expected to completely eliminate their overage by the end of the first quarter.
iSuppli raised its forecast for this year's semiconductor revenue growth to 6.1 percent, up from the previous prediction of 4.7 percent made in the fourth quarter of last year.
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