iSuppli: 2007 winners and losers separated by competitiveness

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/28/2007

2007 has proved to be a good year for those companies with the competitive instinct, according to a report from iSuppli Corp., giving the firm’s preliminary global semiconductor market-share estimate for the year.

The firm adjusted its global semiconductor revenue estimates today, now predicting a rise of 4.1% in 2007, pushing sales to $270.9 billion, up from $260.2 billion in 2006. This represents a minor increase compared to iSuppli’s forecast of 3.5% growth that was issued in September, but is still down from the firm’s June estimate of 6% growth. 

The market researcher reports that, amid slowing growth for semiconductor sales, companies like Intel, Sony  and Infineon that have better execution or that have been better able to capitalize on industry trends or events outperformed the market and their respective competition.

Intel vs AMD

According to iSuppli, Intel’s chip revenue is expected to rise 7.7% in 2007 to reach $33.97 billion in 2007, up from $31.5 billion in 2006, far above the overall semiconductor industry growth rate of 4.1 percent in 2007 and massively outperformed its MPU rival Advanced Micro Devices (AMD), for which iSuppli said 2007 sales are expected to decline by 22.7%.(See charts below.)

“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 , VP of market intelligence at iSuppli, in a statement. “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, according to the firm’s data. Meanwhile, after rising to 8th place in iSuppli’s 2006 ranking, AMD’s revenue decline is expected to cause it to drop down to 11th place in 2007. The firm estimated AMD’s semiconductor revenue in 2007 will decline to $5.8 billion from 2006’s $7.5 billion.

PS3 helps Sony, Toshiba win in 2007

ISuppli further noted Japan-based Sony, for which semiconductor revenue is expected to rise by 56.8% due to its PlayStation 3 video-game console. That compares to an overall consumer-electronics semiconductor revenue increase of only 8.9% in 2007, iSuppli said. Sony’s semiconductor revenue increased to $8 billion in 2007, up from $5.1 billion in 2006, according to the firm’s data.

Japan’s 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 percent, the second-largest percentage increase among the top-20 chipmakers.

“The PlayStation 3-driven performance of these two suppliers is the major factor propelling the world-beating growth of the Japanese semiconductor industry in 2007,” Ford said. “Revenue generated by semiconductor suppliers headquartered in Japan is expected to rise by 11.9 percent in 2007, the largest increase of any region.”

To be fair, the firm noted Sony’s deal to transfer production of its Cell microprocessor for the PS3 to Toshiba. ISuppli noted that if the deal closes before the end of the year, Sony’s chip revenue in 2007 in this area will be transferred to Toshiba, based on the firm’s methodology, and that would drop Sony out the iSuppli’s top-10 rankings.
 
Wireless winners

Competitiveness was also noted in the wireless market by iSuppli as a determinant for winning this year.

Despite its many lawsuits, 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 $5.6 billion, up from $4.5 billion in 2006, iSuppli said, noting Qualcomm’s increase is 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 2007 semiconductor revenue, much of this increase is due to a rise in wireless communications semiconductor sales.

But not all of iSuppli’s estimates for the wireless industry’s players were positive. The firm noted that Texas Instruments, which derives more than 45% of its revenue from wireless communications chips, is expected to suffer a 3.4 percent decline in global semiconductor revenue in 2007.

“With global wireless semiconductor revenue expected to rise by 4.3 percent in 2007, the divergent performances of these companies is being driven by a specific event: Nokia’s initiative to diversify its supply base,” Ford said. “Nokia, the world’s largest seller of mobile phones, historically has used Texas Instruments 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 Texas Instruments. This has benefited other companies such as Infineon, but has cut into Texas Instruments’ sales.”

Meanwhile, the firm noted that 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 said.


Preliminary worldwide ranking of the top-20 suppliers of semiconductors in 2007 (ranking by revenue in millions of U.S. dollars)





Preliminary estimate of global semiconductor revenue in 2007 by company headquarters location (revenue in millions of U.S. dollars)