iSuppli reveals market fall not as steep

Although the global semiconductor industry has little to cheer about in 2009, with revenue dropping by 12.4 percent and only one of the Top-10 suppliers achieving growth for the year, there is one source of solace for the battered chip makers: it could have been much worse.

“The year 2009 will be remembered as one of the most dismal years in the history of the global semiconductor business, with a plunge of more than $32 billion in revenue compared to 2008,” said Dale Ford, senior vice president at iSuppli Corp. “However, iSuppli’s preliminary estimate of a 12.4 percent decline is far better than expectations from early 2009 of a more than 20 percent plunge.”

“There was little room for anything but pessimism after the industry suffered a sequential revenue decline of 21.4 percent in the fourth quarter of 2008 and an 18 percent drop in the first quarter of 2009. However, semiconductor sales rebounded smartly after that, with sequential increases of more than 18 percent in the second and third quarters and an expected 5 percent rise in the fourth quarter. This strong rebound means 2009 will be much less painful than had been feared earlier in the year.”

The better-than-expected results in 2009 are attributable to a surprisingly strong performance in the memory market as well as in sales of chips for consumer electronics and wireless products. Semiconductor suppliers have been broadly impacted by the downturn, with only 27 of the 135 leading semiconductor suppliers tracked by iSuppli expected to achieve revenue growth for the year.

Among the Top-10 suppliers, only one company is expected to achieve growth in semiconductor revenue in 2009: Samsung Electronics Co. Ltd. of South Korea. While the company is set to expand its revenue by only a scant 1.3 percent, this represents a standout performance during such a poor year.

“Samsung is benefitting from its dominance in the memory market, whose performance was dramatically better than the semiconductor industry as a whole,” Ford said. “The company is the No.-1 supplier of both DRAM and NAND flash, the two largest segments of the memory market. Samsung managed to outperform the memory market partly due to its early leadership in new, higher-margin memory products, such as Double Data Rate 3 (DDR3) SDRAM.”

The company maintained its No.-2 position in the global semiconductor market behind microprocessor giant Intel Corp. of the United States. Qualcomm Inc. in 2009 is projected to post the next-best performance among the Top-10 suppliers, with its revenue expected to remain flat compared to 2008. The U.S.-based fabless semiconductor company managed to keep revenue steady due to its participation in the wireless segment and its rising share of the market for baseband chips for cell phones. This will allow Qualcomm to advance two places in the global semiconductor industry, rising to sixth place in 2009, up from eighth in 2008.

Advanced Micro Devices Inc. (AMD) of the United States managed to limit its 2009 revenue decline to 7.6 percent due to its strong performance in the microprocessor market which is also expected to decline by only 7.6 percent in 2009. This allowed AMD to climb back into the Top-10 rankings after a one-year absence, rising to the No.-9 position, up from 12th place in 2008.

Sony Corp. of Japan suffered the worst performance among the Top-10 suppliers, with its revenue set to decline by a stunning 32.8 percent for the year. This is expected to cause Sony’s rank to drop to No.-10 in 2009, down from seventh in 2008. Sony’s poor performance in 2009 contrasts with its dramatic growth over the prior two years. Sony’s revenue swings are mainly driven by internal sales and is strongly influenced by Sony’s internal management of production of its own consumer electronics products. 

The 2009 performances of two top companies were impacted significantly by their divestiture of key business units. Germany’s Infineon Technologies AG dropped out of the Top 10 due to its spinout of Lantiq, its wireline semiconductor business. If Infineon had not sold this business unit, it likely would have moved up to No. 9, compared to No. 10 in 2009. On a similar note, Micron Technology Inc. of the United States would have seen its revenues grow by 2.4 percent and moved up to 11th place in the rankings in 2009 if it had not spun out Aptina, an image sensor supplier, as a separate company.

Looking beyond the Top-10, fabless semiconductor supplier MediaTek Inc. of Taiwan is expected to post the best performance among the world’s 20 largest chipmakers, with an expected increase of 21.7 percent. The company capitalized on the strong growth of China’s cell phone market with its line of mobile handset baseband chips.

On the opposite end of the spectrum is U.S. chip supplier Freescale Inc., which suffered the biggest drop in rankings of any supplier in the Top-20, falling to 17th place, down from 13th in 2009. Company revenue is expected to decline by $1.6 billion for the year.

“The major culprit behind Freescale’s declining revenue was its decision to exit the mobile handset semiconductor market,” Ford said.

The impact of the downturn is significantly different among the various regional and application markets.

The wireless communications market for semiconductors is the most resilient segment in 2009 with an expected decline of only 8.2 percent. Next best will be the data processing segment, with a projected decline of 9.8 percent.

The hardest-hit area, by far, was the automotive electronics industry, with a drop of 26.1 percent, followed by industrial electronics and consumer electronics at negative 15.2 and 15.1 percent respectively.

The Asia/Pacific region is set to post the strongest performance both as a supplier as well as a consumer of semiconductors. Semiconductor companies with headquarters in Asia actually are expected to see their combined revenue grow by 0.3 percent. Total shipments of semiconductors to the Asia/Pacific region are forecasted to decline by only 6.8 percent.

On the other hand, Europe was the hardest hit region in 2009. Shipments of semiconductors to Europe are estimated to fall by 20.8 percent and companies headquartered in the European region are expected to suffer a combined drop of 24.2 percent.

Other 2009 semiconductor developments include:

·     The memory market will fare the best of all major semiconductor segments in 2009 with only a 6.7 percent decline. In fact, NAND flash memory is expected to actually achieve double-digit growth with a projected 16.4 percent rise in revenue.

·     LEDs and NAND memory are the only semiconductor products expected to grow in 2009.

·     Logic integrated circuit and microcomponent revenue is forecasted to decline by 11 percent and 12.5 percent, respectively.

·     The hardest-hit market in 2009 will be analog integrated circuits with an expected drop of 18.7 percent. Next hardest hit will be sensors and actuators with a 16.3 percent decline and discrete semiconductor components with a 15.9 percent decline.