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Semiconductor inventory has declined somewhat, but remains at or near 20-year highs for industrial, automotive, consumer and communication components, according to an analysis by Baird.
“1Q inventory days in the entire tech supply chain, excluding memory, decreased very slightly year over year, the second consecutive year-over-year decrease, and remained almost at a 20-plus year high,” said Baird analysts Tristan Gerra and Tyler Bomba, in a Friday note. “However, 1Q inventory days increased 16% sequentially.”
Baird pointed out particular concern among analog devices.
“Absent a V-shaped recovery in end demand, elevated inventory levels, notably in analog, is a concern and could result in pricing pressures as the supply chain may seek to reduce inventories ahead of the seasonally weak first half of the year,” Gerra added.
Big tech names associated with analog include Microchip (NASDAQ:MCHP), Analog Devices (NASDAQ:ADI), Texas Instruments (NASDAQ:TXN), STMicroelectronics (NYSE:STM) and Skyworks Solutions (NASDAQ:SWKS). Interestingly, all these stocks edged up Friday as Skyworks was up 3.5%, Analog Devices and STMicroelectronics were both up 3.3%, Texas Instruments was up 2.5% and Microchip was up 1.6%.
“We retain a defensive posture on semis, notably with cyclical names, favoring AI-related names and turnaround stories,” Gerra said.