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Highlighting that keeping supply and demand in balance is never something the semiconductor industry is likely to gain a controlling hand over, market research firm, IHS iSuppli is warning that during the fourth quarter of 2010, global inventories held by semiconductor suppliers increased to their highest level in two-and-a-half years. Concern over inventory build was amplified should industry demand growth ease.

The market research firm acknowledged that its own forecast was out of step with reality as it had predicted stockpiles would decrease by 2.5 DOI (days of inventory) in the fourth quarter. The actual fourth-quarter results indicate an eight DOI swing compared to previous expectations.

Semiconductor suppliers had 83.6 days of inventory (DOI) at the end of the fourth quarter of 2010, up 5.5 days, or 7%, from 78.1 days in the previous quarter. Inventory was at its highest level since the second quarter of 2008, when DOI reached 84 days and just before a downturn.

“Inventory levels arguably now are high by any standard, illustrating the difficulty of controlling chip stockpiles even with semiconductor suppliers’ arduous efforts to keep them in check,” said Sharon Stiefel, analyst, semiconductor market intelligence, at IHS. “The sharp increase of semiconductor inventory during the fourth quarter defied expectations of a decline for the period. This inflated level of inventory could become a concern if semiconductor industry growth falls short of expectations in 2011.”

IHS iSuppli reiterated that its current semiconductor forecast puts revenue growth in 2011 at 5.6%.