Intel Market Share Suffers

Staff Reporter -- Electronic News, 9/5/2006

Intel Corp. experienced a dramatic decline in semiconductor revenue in Q2 this year and posted its lowest quarterly market share in more than four years, according to a new report from iSuppli.

Following an increase in its revenue and market share in 2005, Q2 marked a revenue drop of 12.8 percent sequentially for Intel as its share of the global chip market shrunk to 11.4 percent, down from 13.2 percent in Q1. iSuppli noted that the figure marked the lowest market share Intel has experienced since iSuppli began tracking quarterly semiconductor market shares in Q1 of 2002.

“Following such an impressive 2005, this represents a major reversal of fortune for Intel,” said Dale Ford, vice president of market intelligence services at iSuppli. “However, Intel’s recent actions show it understands the need to improve its efficiency and sharpen its focus on its core business of microprocessors and integrated circuits for computing systems.”

QUARTER-TO QUARTER SEMICONDUCTOR MARKET GROWTH BY REGION OF COMPANY HEADQUARTERS
(Percentage Change in Revenue in U.S. Dollars)

Headquarters Region	Q4 '05- Q1 '06	Q1 '06- Q2 '06
Americas Companies	-3.6%	-1.1%
European Companies	3.5%	4.7%
Japanese Companies	-0.8%	1.7%
Asia/Pacific Companies	-6.6%	5.0%
Total Revenue	-2.7%	1.2%

SOURCE: ISUPPLI CORP. SEPTEMBER 2006

Intel was one of only two companies in iSuppli’s Top-20 semiconductor rankings to experience a year-over-year decline in revenues during the second quarter. Only Japan’s Matsushita Electric Industrial Co. Ltd. experienced a similar decline in revenue, the market research firm said.

But for many of the semiconductor companies, Q2 was a good one. iSuppli’s quarterly semiconductor market share research of the leading 100-plus chip suppliers revealed that total semiconductor market revenue grew by 1.2 percent between the Q1 and Q2 of 2006. Revenue increased to $62.3 billion in Q2, compared to $61.5 billion in Q1.

Furthermore, the market experienced a healthy 11.4 percent year-over-year revenue increase in Q2, while the first half of 2006 registered growth of 9.4 percent compared to the same period in 2005.

iSuppli expects growth in the second half of the year to weaken compared to the first half.

One of the stars of the quarter was Hynix Semiconductor Inc., which moved into the Top 10 worldwide semiconductor rankings in the Q2, entering the charts at No. 7. The South Korean memory chip maker achieved 39.7 percent year-over-year revenue growth. This was the strongest growth among all of the Top-10 semiconductor suppliers, according to iSuppli.

Hynix was not alone in posting more than 20 percent year-over-year growth in Q2. Texas Instruments Inc.’s revenue increased 24.1 percent during the period.  This allowed the U.S. wireless chip giant to strengthen its hold on the No. 3 position in the worldwide semiconductor rankings.

QUARTERLY SEMICONDUCTOR MARKET SHARE BY REGION OF COMPANY HEADQUARTERS
(Percentage of Worldwide Revenue in U.S. Dollars)

Headquarter Region	Q2 2003	Q2 2006
Americas Companies	49.0%	47.9%
European Companies	12.0%	12.4%
Japanese Companies	27.1%	22.6%
Asia/Pacific Companies	11.9%	17.1%
Total Revenue	100.0%	100.0%

SOURCE: ISUPPLI CORP. SEPTEMBER 2006

The other fastest-growing companies among the Top-20 semiconductor suppliers were Micron Technology Inc., with 23.3 percent growth; Advanced Micro Devices Inc. (AMD), with a rise of 52.6 percent; Qualcomm Inc., up 47.9 percent; Broadcom Corp. with a 55.6 percent increase and IBM Microelectronics Inc. with a 38.2 percent expansion in revenue.

Infineon Technologies AG of Germany and its memory spin-off Qimonda AG in the Q2 captured the No. 11 and No. 13 rankings, respectively, with Qimonda’s revenues only $5 million lower than No. 12 Micron in the Q2.

The Infineon/Qimonda combination helped European-headquartered companies deliver the strongest regional performance in the semiconductor industry in the first half of 2006, with sequential growth in the first and second quarters of 3.5 percent and 4.7 percent, respectively. Asia/Pacific-based companies posted much more volatile performance in the first half of 2006, experiencing a 6.6 percent decline in the first quarter and then rebounding with 5 percent growth in the second quarter, according to iSuppli.

Despite this mixed performance in 2006, Asia/Pacific companies have increased their share of semiconductor market revenue dramatically during the past three years. The Asia/Pacific share of worldwide semiconductor revenue rose to 17.1 percent in the Q2 of 2006, up from 11.9 percent in the Q2 of 2003. Meanwhile, Japanese companies saw their overall semiconductor market share decline to 22.6 percent in the second quarter of 2006, down from 27.1 percent in the second quarter of 2003.

TOP 10 SEMICONDUCTOR SUPPLIERS IN THE SECOND QUARTER OF 2006
(Ranking by Revenue in Millions of U.S. Dollars)

Q1 2006 Rank	Q2 2006 Rank	Company Name	Q1 2006 Revenue	Q2 2006 Revenue	% Change	% of Total	Cumulative %
1	1	Intel	8,135	7,095	-12.8%	11.4%	11.4%
2	2	Samsung Elecronics	4,414	4,481	1.5%	7.2%	18.6%
3	3	Texas Instruments	3,017	3,175	5.2%	5.1%	23.7%
4	4	STMicroelectronics	2,363	2,495	5.6%	4.0%	27.7%
5	5	Toshiba	2,317	2,328	0.5%	3.7%	31.4%
6	6	Renesas Technology	1,963	2,081	6.0%	3.3%	34.8%
9	7	Hynix	1,447	1,694	17.1%	2.7%	37.5%
7	8	Philips Semiconductor	1,469	1,534	4.4%	2.5%	40.0%
8	9	Freescale Semiconductor	1,466	1,527	4.2%	2.5%	42.4%
10	10	NEC Electronics	1,386	1,380	-0.4%	2.2%	44.6%
		Other Companies	33,507	34,462	2.9%	55.4%	100.0%
		Total Revenue	61,484	62,252	1.2%

SOURCE: ISUPPLI CORP. SEPTEMBER 2006