Global Semiconductor Companies Accumulate Raw Materials to Prepare for Increased Production, Inventory Assets Reach Record High Levels

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The inventory assets of major global semiconductor manufacturers such as Samsung Electronics, TSMC, and Intel have reached an all-time high. It is analyzed that semiconductor companies increased their inventory assets by stockpiling raw materials in preparation for increased production to resolve supply shortages.

According to Japan's Nikkei on the 20th, the inventory assets of nine global semiconductor companies including Samsung Electronics, SK Hynix, TSMC, Intel, Micron, Western Digital, Texas Instruments, Infineon, and STMicroelectronics amounted to $64.7 billion (approximately 76.1 trillion KRW, some data from May) as of the end of June, marking a record high on a quarterly basis. Inventory assets include finished semiconductor products, products currently in production, and raw materials.

Inventory assets have increased mainly due to raw materials. This is explained by semiconductor companies securing raw materials in advance to respond to semiconductor demand that has continued since the end of last year. Nikkei reported that the proportion of raw materials in the inventory assets of seven semiconductor companies exceeded 24% as of the end of March, showing an upward trend since the end of March 2019. Although raw materials are being stockpiled, the inventory turnover rate?which indicates whether inventory assets are converted into sales as products are produced and sold?reached 7.8 times in the second quarter, the highest level in over a year.

However, inventory assets of memory semiconductor manufacturers, where domestic companies such as Samsung Electronics have strengths, have been reported to be decreasing.

Some analysts suggest that semiconductor companies are stockpiling more inventory than necessary as it remains difficult to accurately assess the actual demand from their customers. Additionally, since the market conditions worsened after semiconductor companies made large-scale investments in production capacity expansion, there were cases where production capacity exceeded demand. Therefore, there are concerns that the current strategy of expanding raw materials could become a burden in the future.

This content was produced with the assistance of AI translation services.