Competitiveness separates winners from losers in 2007 semiconductor market, says iSuppli

The preliminary 2007 global semiconductor market-share estimate from iSuppli reveals performances by individual companies in specific market segments are varying widely, indicating that amid slowing growth for semiconductor sales, companies that have superior execution or that have been better able to capitalize on industry trends or events outperformed the market – and the competition.

Intel upside

Case in point is the world's largest semiconductor supplier, Intel, whose chip revenue is expected to rise 7.7% in 2007 to reach US$33.97 billion in 2007, up from US$31.5 billion in 2006, according to iSuppli. Intel exceeded the overall semiconductor industry growth rate of 4.1% in 2007 and massively outperformed its PC microprocessor rival, AMD, whose sales are expected to decline by 22.7% for the year.

"Throughout most of the year, Intel successfully defended much of the market share that it won from AMD in the first quarter in the PC microprocessor segment due to the success of its lines of dual- and quad-core chips," said Dale Ford, vice president, market intelligence, for iSuppli. "This represents a major reversal of fortune compared to 2006, when AMD had the advantage with its popular dual-core microprocessors, allowing it to gain share from Intel."

Intel's market-share rose to 12.5% in 2007, up from 12.1% in 2006. After rising into the Top-10 rankings for the first time ever last year, AMD's revenue decline is expected to cause it to drop back to 11th place in 2007, down from eighth place in 2006. AMD's semiconductor revenue in 2007 is set to fall to US$5.8 billion, down from US$7.5 billion in 2006.

Source: iSuppli, compiled by Digitimes, November 2007

Sony and Toshiba win at video games

Another example of how individual circumstances are determining company performance is consumer-electronics powerhouse Sony, whose semiconductor revenue is expected to rise by 56.8% in 2007, by far the highest percentage growth of all the Top-20 semiconductor suppliers for the year. In contrast, overall consumer-electronics semiconductor revenue is set to increase by only 8.9% in 2007.

Sony's revenue increase is nearly all due to its sales of chips for the company's PlayStation 3 (PS3) video-game console. Company semiconductor revenue increased to US$8 billion in 2007, up from US$5.1 billion in 2006.

Toshiba, which supplies semiconductors to Sony for the PS3 as well, also is expected to post a standout performance in the global semiconductor industry in 2007 with growth of 24.1%, the second-largest percentage increase among the Top-20 chip makers.

"The PS3-driven performance of these two suppliers is the major factor propelling the world-beating growth of the Japanese semiconductor industry in 2007," Ford observed. "Revenue generated by semiconductor suppliers headquartered in Japan is expected to rise by 11.9 % in 2007, the largest increase of any region."

With fellow Japanese suppliers Renesas Technology and NEC Electronics expected to post a revenue increase of 3% and a decline of 0.8 % respectively, it's clear that Sony and Toshiba are the major factors driving growth in Japan's chip industry.

Source: iSuppli, compiled by Digitimes, November 2007

Sony has announced a deal to transfer production of its Cell microprocessor for the PS3 to Toshiba. If this deal closes before the end of the year, Sony's chip revenue in 2007 in this area will be transferred to Toshiba, based on iSuppli's methodology.

Under these circumstances, Toshiba would increase its distance from Texas Instruments (TI) as the world's number three semiconductor supplier, while Sony would drop out of the Top-10 rankings.

Qualcomm heads in opposite direction from Texas Instruments and Freescale

Yet another example of company-specific trends can be seen in the divergent performances of various wireless semiconductor suppliers, iSuppli noted.

Qualcomm is expected to post the third largest increase in revenue among the Top-20 semiconductor suppliers in 2007, rising by 23.7% to reach US$5.6 billion, up from US$4.5 billion in CY 2006. This will put Qualcomm into the market's 12th ranking in 2007, up from 16th in 2006.

Qualcomm's increase is entirely due to a surge in sales of semiconductors for mobile handsets and infrastructure.

Meanwhile, Infineon Technologies is set to achieve a 14.6% increase in semiconductor revenue in 2007, much of this increase is due to a rise in wireless communications semiconductor sales.

However, TI, which derives more than 45% of its revenue from wireless communications chips, is expected to suffer a 3.4 % decline in global semiconductor revenue in 2007.

"With global wireless semiconductor revenue expected to rise by 4.3% in 2007, the divergent performances of these companies is being driven by a specific event: Nokia's initiative to diversify its supply base," Ford noted. "Nokia, the world's largest seller of mobile phones, historically has used TI as its near-exclusive supplier of wireless baseband suppliers. However, the company has engaged in a strategic initiative to add other baseband suppliers to reduce its dependency on TI. This has benefited other companies such as Infineon, but has cut into TI's sales."

Meanwhile, fellow mobile-handset semiconductor supplier Freescale Semiconductor is set for a 10.7% decline in chip sales for 2007. This is primarily due to weakness at Freescale's largest customer, Motorola, which has been losing market share to Nokia and Samsung in mobile handset sales in 2007.

iSuppli mildly revises up semi revenue forecast for 2007

iSuppli now estimates global semiconductor revenue will rise by 4.1% in 2007 to reach US$270.9 billion, up from US$260.2 billion in 2006. This represents a minor increase compared to iSuppli's forecast of 3.5% growth that was issued in September.

"Sequential growth in global semiconductor revenue in the third quarter amounted to 11.9%, very close to iSuppli's forecast of an 9.9% expansion," Ford said. "With the third-quarter results slightly exceeding expectations, iSuppli has raised its annual revenue estimate by a scant 0.6 of a percentage point."