Intel Tightens Grip on Semi Market

Stop writing off {complink 2657|Intel Corp.} either as an investment or a dominant force in the semiconductor market.

The company hasn't cracked rival {complink 444|ARM Ltd.}'s domination of the mobile communications IC market, but without a doubt the Santa Clara, Calif.-based company is still king of the semiconductor market. Someday, a faster-growing semiconductor company might displace Intel at the top of the industry ranking, but all indications are that this is unlikely to happen in 2011 or for the next several years.

In 2011, Intel's sales are forecast to grow a stunning 23 percent from 2010, eclipsing by far the total industry growth rate of approximately 2 percent, and helping the company widen the gap between it and closest rival {complink 4751|Samsung Electronics Co. Ltd.}, which in the prior three years made significant gains on the much bigger rival, according to {complink 7427|iSuppli Corp.}. Intel's market share will by the end of this year climb to almost 16 percent, from 13.2 percent in 2010 on a jump in sales to an estimated $49.7 billion, up from $40.4 billion. Samsung, on the other hand, is forecast to grow a piddling 3 percent in 2011, to $29.2 billion from $28.4 billion, giving it a 9.3 percent market share, almost unchanged from 2010.

Samsung's exposure to the weak memory market hurt the company and rival suppliers to that industry segment. ISuppli noted that companies like Hynix Semiconductor, Micron Technology, and Elpida Memory will report double-digit sales declines for 2011, hurt by price weakness and falling demand. A recovery in demand for DRAM may not materialize soon, meaning many of these companies will continue to face crushing pricing pressures.

Intel's continued dominance of the chip market isn't a result of pure organic growth. While the company maintained its iron grip on its core microprocessor market, it has also benefitted from a strategic acquisition meant to give it a bigger role in the hot mobile communications IC segment.

The purchase earlier this year of the wireless solutions business of {complink 2565|Infineon Technologies AG} will positively affect Intel's total sales in 2011, iSuppli said. And, while MPUs will remain the company's main market, the continuing merging of the PC and mobile communications segments could further expand Intel's sales as it looks set to win over OEMs that currently use competing ARM chips in their tablets, smartphones, and other wireless devices.

“In a challenging year for the semiconductor market, Intel achieved success on all fronts, expanding its core microprocessor and memory business, while also capitalizing on a major acquisition,” said Dale Ford, an analyst at iSuppli, in a statement. “This allowed the company to outgrow the market and expand its lead over its closest competitors, defying the impact of weak economic conditions and catastrophic disasters in Japan and Thailand.”

Top Semiconductor Vendors

Other semiconductor players benefitted from acquisitions made during the year and improved their rankings as a result. {complink 5703|Texas Instruments Inc.} is now ranked the world's third biggest semiconductor vendor following its purchase of National Semiconductor Corp., a transaction that will help the company boost revenue in 2011 to $14.1 billion from $13 billion in 2010 and push its market share up slightly to 4.5 percent versus 4.2 percent in the prior year.

{complink 4505|Qualcomm Inc.} will also improve its 2011 ranking to the No. 6 slot, up from ninth in 2010, on a 40 percent hike in sales fueled by its purchase of Atheros Communications. Qualcomm's overall market share is seen rising almost one full percentage point to 3.2 percent in 2011 from 2.4 percent in 2010.

{complink 3993|ON Semiconductor Corp.} is forecast to grow at the fastest pace in 2011, lifted by its purchase of the chip division of {complink 4185|Panasonic Corp.}. That acquisition — of Sanyo Semiconductor — is expected to lift sales at ON Semiconductor to $3.4 billion in 2011, up almost 50 percent, from $2.3 billion in 2010. The Sanyo acquisition pushed ON Semiconductor up for the first time to the Top 20 ranking. The company is now estimated to be the world's 19th biggest chip vendor, rising from No. 26 in 2010.

While acquisitions boosted some companies, they helped dragged down sellers. Panasonic's sale of Sanyo Semiconductor will push the company's ranking in the IC market down to No. 20 in 2011, estimates iSuppli, from No. 15 in 2010. The research firm estimates Panasonic's 2011 revenue will decline about 32 percent to approximately $5 billion from $3.4 billion in 2010.

Here are some additional notable developments from iSuppli's 2011 ranking of the chip market:

  • As the company most heavily impacted by the Japan disaster, Japan's Renesas Electronics Corp. was the only Top 5 supplier to see its revenues fall in 2011. The No. 5-ranked semiconductor supplier will see its revenue decrease by 6.2 percent for the year.
  • Nvidia Corp. of the United States is forecast to achieve the fourth-strongest performance among the Top 20 with 14.9 percent growth. This will boost it up the rankings by three spots to No. 17.
  • Freescale Semiconductor Inc. of the US moves up two positions to No. 14.
  • Given all of the major moves among the Top 20 suppliers, only one company is likely to drop out of the Top 20. At this point, IHS iSuppli projects Taiwan's MediaTek Inc. will slip to No. 22, following a drop in revenue of 15.8 percent.
  • Out of 150 leading semiconductor suppliers tracked by IHS on a quarterly basis, nearly 55 percent are expected to achieve positive revenue growth in 2011.
  • Only companies headquartered in the Americas region achieved growth as a group in 2011 with a very strong 8.5 percent expansion. Companies headquartered in the other three regions — i.e. Asia-Pacific, Japan and Europe-Middle East-Africa — are expected to see their revenue fall between 3.1 and 5.9 percent in 2011 as a group.

12 comments on “Intel Tightens Grip on Semi Market

  1. Barbara Jorgensen
    December 1, 2011

    Write off Intel? Hardly. The fact that it grew in all its product categories is especially impressive in this market.

  2. bolaji ojo
    December 1, 2011

    I've attended semiconductor conferences where analysts continue to insist Intel plays in a “dead” market. They spend a lot of their time seeking a new player who is able to turn the industry upside down. I have a great deal of respect for the folks at Intel, and that's based on the culture of innovation at the company, plus their oft-stated believe that surviving requires a touch of paranoia.

  3. DataCrunch
    December 1, 2011

    People always seem to want to knock down the giants, but Intel continues to innovate and invest heavily in R&D.  This is not a company that sits on the sidelines or a company on its way down.   

  4. _hm
    December 1, 2011

    If Apple can move from product to semiconductor market, why can not Intel move from semiconductor to product market? Intel should take some bold and innovative steps to grow more.

  5. bolaji ojo
    December 1, 2011

    Dave, I recall about 10 years ago when the high-tech industry was in the throes of a major recession, everyone was in lockdown mode, cutting expenses and payroll and sharply scalling back R&D and capital expenditure. Intel went in a different direction. That year, the company boosted capex to about $10 billion, announced plans to build new fabs and said it will invest its way out of the downturn.'

    That investment focus helped Intel pull away from Advanced Micro Devices. Years later, we are discussing how the company is still pulling away from rivals by increasing its investment in new market segments.

  6. Jay_Bond
    December 2, 2011

    I find it amazing that investors and analysts would actually consider writing off Intel. Intel is about to end 2011 with some staggering numbers. When you consider all of the global economic woes this year, Intel is running strong and continuing to innovate. I don't see Intel being written off for a long time.

  7. bolaji ojo
    December 2, 2011

    Jay, They never put it in such stark terms, of course. They just say it with a show of hands. If asked where they would like to put their funds over the next five years, solid companies like Intel don't get a lot of votes because somebody believes a smaller company is going to eclipse them soon. The “Sky is going to fall tomorrow” on their head soon, I hear. Tomorrow hasn't come yet! Not for Intel but, of course, the company is no doubt aware of the dire forecast.

    In reality, investors know Intel isn't about to fade away. They just don't see it as a fast-growth stock. The acquisition of Infineon's wireless business helped Intel prove them wrong in 2011. Now, it must give the encore in 2012. Who will win this waiting game?

  8. SunitaT
    December 5, 2011

    People always seem to want to knock down the giants, but Intel continues to innovate and invest heavily in R&D.  

    @Dave, Intel not only invests heavily in R&D but it also invests smartly in startup technologies. For example Intel is planning to invest $20M in 6 Indian startup's. This kind of investment is helping Intel to have an advantage over other companies.

  9. SunitaT
    December 5, 2011

    Intel went in a different direction. That year, the company boosted capex to about $10 billion, announced plans to build new fabs and said it will invest its way out of the downturn.

    @Bolaji, that shows the confidence of the company. Infact TI did similar thing during 2008 downturn. It went ahead and bought troubled German DRAM maker Qimonda. Infact downturn is the best time for acquisation because valuations of the companies fall during downturn. Only companies like Intel and TI can take such risks.

  10. bolaji ojo
    December 5, 2011

    Tirlapur, Correct. Cash and a solid business model are key to acquisitions and rising R&D/capex. Intel took steps rivals dared not because it had the cash and also could get financing more easily. The company generates huge cash flow from its microprocessor business and was able to bet a substantial amount without draining its resources completely. The company also happens to have a solid strategy and a visionary management.

    Intel has bombed in the past, though. Not all of its investments have panned out. At the same time it was investing in new fabs and R&D, it made some critical acquisitions in the communications IC market to break into the mobile phone segment. They didn't quite work out. Not yet is a better way to put it as it is still possible for some of these to pay off.

  11. Wale Bakare
    December 11, 2011

    Yes Dave, i agree with you. Intel's refusal not to shift its mind off technology research and developments for a nano-second has been a major contributor to its market success. Am afraid, no other players in the field of semi for now can beat Intel, i think. 


  12. DataCrunch
    December 11, 2011

    @tirlapur – Intel Capital is definitely one in the biggest corporate venture organization.

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