Chip Manufacturing

[JS80]

I was wondering if any of you know how chip manufacturing works. I've been looking at Intel's balance sheet and they have so much in inventory ($3.5 billion). Why would they carry so much inventory knowing chips go obsolete so fast? Is it hard to have it Just in Time?

 

[robertk2012]

Well they have over 38 billion in revenue so 3.5 is not as large as it may seem. Their inventory turn is right around the industry average and their accounts recievable turn is way above the industry. They probably hold some chips in reserve in case their is a production problem and also to fill in during times that the plants are changing over.

 

[imported_Questar]

Originally posted by: JS80
I was wondering if any of you know how chip manufacturing works. I've been looking at Intel's balance sheet and they have so much in inventory ($3.5 billion). Why would they carry so much inventory knowing chips go obsolete so fast? Is it hard to have it Just in Time?

From wafer start until a chip is produced is about three months. No JIT manufacturing with those lead times. Generally the top tier oems and distributers book chip orders six months in advance.

Intel is about 1-2 weeks high on inventory right now.

 

[Viditor]

Originally posted by: Questar

Originally posted by: JS80
I was wondering if any of you know how chip manufacturing works. I've been looking at Intel's balance sheet and they have so much in inventory ($3.5 billion). Why would they carry so much inventory knowing chips go obsolete so fast? Is it hard to have it Just in Time?

From wafer start until a chip is produced is about three months. No JIT manufacturing with those lead times. Generally the top tier oems and distributers book chip orders six months in advance.

Intel is about 1-2 weeks high on inventory right now.

Correct, with one caveat...while Intel has 1-2 weeks excess inventory in stock, the channel is estimated to have 4-5 weeks excess inventory in stock ATM. This is why Intel was downgraded recently...

 

[coldpower27]

Originally posted by: JS80
I was wondering if any of you know how chip manufacturing works. I've been looking at Intel's balance sheet and they have so much in inventory ($3.5 billion). Why would they carry so much inventory knowing chips go obsolete so fast? Is it hard to have it Just in Time?

Did you look more closely on the inventory breakdown itself, Finished product inventory amounts to 1.2 billion only, so that is basically all they have on hand that they can sell, the rest is raw materials and works in progress. not to mention there is no mention of what that product inventory is. Intel believe it or not makes other things besides just processors.

http://www.intel.com/pressroom/archive/releases/20060419corp.pdf