Analog Chip Inventories Fall as Buyers Report Supply Shortage Concerns

Distributor inventories of True Analog and Power Analog chips fell in the latest reading as prices for both categories rose, while most surveyed buyers remained concerned about shortages over the next six months.

The True Analog inventory index stood at 85 and the Power Analog index at 76, with 1Q24 set at 100. The measures declined 7% and 10%, respectively, from the previous quarter and 15% and 18% from a year earlier. A separate microcontroller (MCU) inventory index was 91, down 5% quarter over quarter and 3% year over year.

Average selling prices moved in different directions: True Analog gained 12% and Power Analog 9% quarter over quarter, while MCU fell 7%. Prices for discrete components rose 34%.

The net balance for near-term demand expectations was +79%, down 10 percentage points from the previous quarter. The recent net demand reading was +75%, while net balances for recent and expected price increases were +68% and +65%, respectively.

Shortage concerns remained widespread. Seventy percent of distributors and 76% of direct buyers were concerned about shortages during the next six months, a three-percentage-point increase from the previous quarter. At the same time, 38% of distributors and 26% of direct buyers said their current supply exceeded target levels.

Buyers reported steps to protect supply. Seventy-three percent said they had ordered early or signed long-term supply agreements, and 53% said they had raised inventories or safety stocks. The proportion reporting longer delivery times rose to 65% from 62%.

Second-quarter data showed analog companies’ production up 7% from the previous quarter and revenue up 11%, while total inventory was unchanged. Microchip Technology’s inventory fell nine days to 175 days, while onsemi’s declined 11 days to 189 days; onsemi’s production remained about equal to sales.

Third-quarter revenue estimates exceeded seasonal rates for four chipmakers: Texas Instruments (TXN), 10.7% versus 6.1%; Analog Devices (ADI), 8.5% versus 4.6%; Microchip Technology (MCHP), 8.5% versus 4.3%; and onsemi (ON), 5.4% versus 4.0%.

Distributor restocking had not begun; whether the upward trend continues depends on when restocking starts and how long supply tightness lasts.