Sector Snap: Chip stocks up, inventory trends seen improving

The chip sector, as measured by the Philadelphia Semiconductor Index, rose 1.81 points or 0.46 percent to 399.44 in afternoon trading.

Citigroup analyst Jim Suva said that overall inventory levels look "benign" and "not as bloated as in prior cycles."

Electronic manufactures' chip inventory levels are a key demand indicator, as manufacturers with high inventory levels are less likely to order more product.

However, Suva said that consumer demand remains the big question as the economy remains uncertain.

He said he continued to favor Intel Corp. and memory chip maker Micron Corp. in the personal computer market and logic chip maker Altera Corp. in the commercial market.

Shares of Santa Clara, Calif.-based Intel rose 28 cents to $23.45 in afternoon trading while Boise, Idaho-based Micron rose 2 cents to $8.21. Shares of San Jose, Calif.-based Altera rose 18 cents to $22.53.

In the same note, Citigroup analyst Craig A. Ellis said memory chip maker SanDisk Corp. should benefit from market trends in the second half of the year and said inventories are positive for NAND chips. SanDisk is one of the world's largest makers of NAND Flash memory chips, which are found in iPods, digital cameras and other portable devices.

SanDisk shares rose 5 cents to $29.33 in afternoon trading.

It wasn't all good news or chip testing companies.