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Intel chip surplus drives up industry inventory

It'll take some time to shift, warns market watcher

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The chip industry's stockpile of unwanted processors and chipsets jumped above expectations during Q2, and it's largely Intel's fault, market watcher iSuppli claimed yesterday. It's almost entirely Intel's problem, too.

In Q1, there were $1.1bn worth of unsold PC chips in the electronics supply chain. In Q2, the surplus rose to $2bn, an increase of 81.8 per cent, iSuppli said. The company had been anticipating a more modest increase of 18.2 per cent to $1.3bn.

With most of the surplus sitting in Intel warehouses, the increase was "not a major concern" for the industry as a whole, iSuppli added. It's not good news for AMD, though, which now has to compete with Intel's price cuts, made to help the chip giant shift its stockpile, it seems.

Will such measures work? iSuppli thinks not, and predicted the surplus will last well into 2007. Lower prices backed by large stockpiles are encouraging buyers to make small, frequent semiconductor orders rather than big, all-at-once, stockpile-reducing demands. ®

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