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Electronics Production | March 12, 2009

Semiconductor Kings suffer sales tragedy in 2008

Shakespeare’s adage, “Uneasy lies the head that wears a crown,” was certainly true for the kings of the semiconductor industry in 2008, with eight out of the Top-10 suppliers suffering revenue declines for the year, according to iSuppli.
iSuppli’s final ranking of semiconductor suppliers in 2008 reveals that the majority of the industry’s leading companies not only saw sales declines—they also underperformed the overall chip industry for the year.

“It’s not always good to be the king, as shown by the results of most of the top semiconductor suppliers in 2008,” said Dale Ford, senior vice president, market intelligence services, for iSuppli. “Many of these suppliers are focused on semiconductor segments that performed poorly during the year, including memory, Digital Signal Processors (DSPs), analog Integrated Circuits (ICs) and standard logic. This caused 80 percent of the Top-10 and 60 percent of the Top-25 semiconductor suppliers to experience declining revenues compared to 2007.”

Among the nearly 300 companies covered in iSuppli’s global semiconductor rankings, 43% were able to achieve flat to positive growth during 2008, showing that the Top-10 suppliers significantly underperformed their smaller rivals.

Among the Top-25 suppliers, the companies managing to expand their revenue were No-5 ranked STMicroelectronics, No.-8 Qualcomm Inc., No.-11 NEC Electronics Corp., No.-14 Broadcom Corp., No.-15 Panasonic Corp., No.-18 Sharp Electronics Corp., No.-20 Rohm, No. 22 Marvell Technology Group Ltd., No.-23 MediaTek Inc. and No.-24 Fujitsu Microelectronics Ltd.

The attached table presents iSuppli’s final Top-25 semiconductor revenue ranking for 2008.


Organic famine
Even among those 10 suppliers, their growth in 2008 wasn’t necessarily all it was cracked up to be—with only six actually increasing their sales organically.

“The growth achieved by STMicroelectronics, Broadcom, Rohm and MediaTek in 2008 was enabled or enhanced by major acquisitions during the year, rather than by increasing sales in their existing product lines,” Ford observed. “The remaining six—Qualcomm, NEC, Panasonic, Sharp, Marvell and Fujitsu—expanded their revenues by between 1.5% and 15.3% in 2008 based only on organic growth. However, for the four Japanese suppliers, NEC, Panasonic, Sharp and Fujitsu Microelectronics, this growth was less about rising sales and more about a significantly more favorable exchange rate between the Japanese yen and the U.S. dollar.”

Underperformances
Beyond seeing their revenue growth lopped off, six of the Top-10 suppliers underperformed the overall semiconductor industry in 2008: No.-2 Samsung Electronics Co. Ltd., No.-3 Toshiba Corp., No.-4 Texas Instruments Inc., No.-6 Renesas Technology, No.-7 Sony Corp. and No.-9 Hynix Semiconductor Inc. All of these companies experienced revenue declines greater than the 5.2% for the overall semiconductor market.

Hynix posted the largest revenue decline among the Top-10 and Top-25, at 33.4%. "The sharp decline in memory sales in 2008 resulted in Hynix’s precipitous revenue plunge—and its fall to the No.-9 ranking, down from sixth-place in 2007,” Ford said. The next biggest decline was posted by NXP Semiconductors, at 29.4%, due to the spin off of its wireless chip business. The next biggest decliners were Samsung, Sony and Renesas.

Fourth-quarter fiasco
iSuppli’s final estimate of a 5.2% decline in 2008 semiconductor revenue represented a significant widening from the 2% decrease it projected in November. The performances of many semiconductor suppliers also came in below expectations.

“In iSuppli’s November estimate, fourth-quarter semiconductor revenue was projected to decline by 8.8% compared to the third quarter based on guidance provided by semiconductor suppliers in reporting their quarterly financial results,” Ford noted. “However, the final results show that the market experienced a significant and broad-based decline of 21.5% in the fourth quarter. While memory IC revenues struggled with negative growth for an extended period, the market decline in the fourth quarter impacted every semiconductor segment—without exception.”

The semiconductor segments suffering the deepest declines in the fourth quarter were Digital Signal Processors (DSPs), NOR flash memory and application-specific analog ICs. These areas saw their revenues fall by between 25% to 28% in the fourth quarter. The products in these areas, along with DRAM, NAND Flash, Display Drivers and Standard Logic ICs, also suffered the largest percentage revenue declines for the full year of 2008 of all semiconductor segments.

Bright spots
Amid the carnage, four of the suppliers that managed to expand their revenue in 2008 improved their market-share rankings significantly for the year. Qualcomm moved into the Top-10 rankings, rising to eighth place in 2008, up from 13th in 2007. Broadcom jumped to No.-14, up from No.-19. Rohm and MediaTek also moved up to the 20th and 23rd rankings respectively.

Results for the full year 2008 show that optical components, standard linear ICs, programmable logic devices, microprocessors and sensors/actuators were the only major semiconductor market segments to achieve growth, with their revenues increasing between 1% and 6%. Wired communications and industrial electronics were the only end-market segments to see increased revenues for 2008 with growth between 2% and 3% for the full year.

Absolutely fabless
Once again, fabless semiconductor suppliers outperformed the overall semiconductor market and led the growth among the Top-25 semiconductor suppliers in 2008. Fabless suppliers as a group achieved revenue growth of 1.4% in 2008. Qualcomm, Broadcom, Marvell Technology and MediaTek each grew their revenues in a range between 10.2% and 23.9% in 2008. Out of the five fabless companies in the Top-25 rankings, only nVidia saw its revenues decline in 2008.

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