Electronics Production | April 30, 2009

Qualcomm and ST-Ericsson shine, even as wireless chip market tanks

How bad was the fourth quarter of 2008 for the global wireless communications semiconductor industry? So bad that the accumulated 10% revenue growth during the first three quarters of 2008 was wiped out by a 23.3% decline during the last three months of the year, causing annual growth for wireless semiconductors to go flat with a marginal 0.7% increase.
These figures consist of revenue from sales of application-specific semiconductors for wireless applications, including mobile handsets, wireless infrastructure equipment, wireless LANs and connectivity products. The numbers do not account for other types of semiconductors used in wireless products, including memory chips.

“Makers of mobile handsets and other wireless devices essentially stopped ordering semiconductors in the fourth quarter,” said Francis Sideco, senior analyst, wireless communications, for iSuppli. “This was due to extremely weak end demand for wireless products in the fourth quarter. Meanwhile, the entire wireless supply chain engaged in an inventory reduction effort, further inhibiting ordering activity.”

With conditions deteriorating so rapidly in the fourth quarter, wireless semiconductor suppliers’ visibility of future demand trends dropped to as little as one day in the fourth quarter, leaving the market in a high state of uncertainty.

Qualcomm and ST-Ericsson gain share
Leading wireless semiconductor supplier Qualcomm handily outperformed the overall market in 2008, with a 15.3% increase in revenue. This boosted Qualcomm’s market share to 21.7% for the year, up from 19% in 2007. “Qualcomm continues to benefit from strong sales of its WCDMA and HSPA baseband chips,” Mr Sideco said.

The attached table presents percentage wireless semiconductor revenue share for the world’s Top-5 suppliers.

Qualcomm’s strong performance comes despite the International Trade Commission’s (ITC’s) decision in June, 2007 to ban U.S. imports of some mobile phones that include certain Qualcomm Inc. 3G chips. As iSuppli predicted at the time, the ban did not have a significant impact on the company’s overall sales.

However, the best performance among the Top-5 wireless semiconductor suppliers in 2008 was posted by ST-Ericsson, whose revenue rose by a stunning 88.4% for the year. ST-Ericsson, a joint venture between ST-NXP Wireless and Ericsson Mobile Platforms, increased its market share by 4.4 percentage points in 2008 compared in 2007.

“ST-Ericsson appears to be meeting the goals of the joint venture, with combined companies achieving the level of scale in their volume and portfolio breadth that will enable gains in share. The company now is sitting solidly in the market’s No.-3 position.”

Former market wireless semiconductor leader, No.-2 Texas Instruments, suffered the worst performance among the Top-5 suppliers in 2008, with revenue plunging by 22.5% for the year. The company continued to lose share in wireless chips as its major customer, Nokia, took steps to diversify its supply base and engage more with other wireless chip makers.


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