LONDON – Chip inventory expanded sequentially by 9 percent in the second quarter of 2010, according to a survey of 35 chip manufacturers, conducted by industry analysis firm iSuppli Corp. Meanwhile foundry lead times have shrunk, according to a Digitimes article.

Midway through the second-quarter, total inventory from approximately 35 semiconductor component manufacturers stood at $9.6 billion, up 9 percent from $8.9 billion in the first quarter and this represented a faster climb than the seasonal average of 3.2 percent, iSuppli said.

However, the firm argued that coming off a low base the growing inventory does not yet represent a cause for concern in the industry with demand expected to increase in the second half of 2010. "Overall, however, the increase in inventory reflects a justifiable build, and iSuppli is not concerned over an inventory bubble," iSuppli said.

Chip companies enjoyed record revenues, profits and gross margins in the second quarter andpositive revenue guidance for the third quarter is leading managers to increase inventories for the second half of the year.

Most chip manufacturing plants are close to being sold out and the companies are taking looking to invest in increasing capacity.

Nonetheless, lead times at foundries are shrinking fast, according to a Digitimes report that cited unnamed Taiwanese IC design engineers. Lead times at 200-mm wafer fabs have dropped to two weeks from more than 10 weeks earlier in 2010 the article said. Lead times on 300-mm wafers are three weeks.