Analyst firm says stocks are at the right level

The processor supply chain continues to be healthy, despite a surge in chip stocks during the first quarter of this year, according to market research organisation iSuppli.

The market watcher said that although chip supplies swelled faster than most expected during the first quarter, it estimated that semiconductor stocks were $50m less than the optimal target, and contrasted this situation with a $844m store of chip inventory during the fourth quarter of last year.

Chip supply and demand, said iSuppli, appeared to be in balance
Rosemary Farrell, a senior analyst at iSuppli, said even though semiconductor stocks "lurk slightly below" the optimal level, the manufacturers are holding more supply than is needed. She said that is because they have to build more to compensate for "underweight" stocks in the rest of the supply chain.
Distributors are also hanging onto stock, she said, but their levels are low and they don't want to buy more given weakness in demand.