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OEMs to Spend More on Semiconductors for Wireless than for Computers

EL SEGUNDO, CA — In another sign of the technology industry’s fundamental shift away from PCs and toward mobile communications, the wireless segment is expected to overtake computers to become the world’s leading application market for semiconductor purchasing by original equipment manufacturers (OEMs) starting in 2011.

Driven by booming sales of smartphones and tablets, OEMs in 2011 will buy $55.4 billion worth of semiconductors for use in wireless devices, up 10.7 percent from $50.1 billion in 2010, according to the new IHS iSuppli Semiconductor Spend Analysis report from information and analysis provider IHS (NYSE: IHS). In contrast, OEMs will spend $53.1 billion on semiconductors used to make computers, up a scant 1.2 percent from $52.5 billion in 2010.

Not only will wireless be the leading category for semiconductor spending in 2011, wireless will also expand its lead in 2012 as the high-technology market increases its focus on mobile, Internet-connected devices.

“Led by Apple Inc.’s iPhone and iPad, demand is booming for smart phones and tablet devices,” said Wenlie Ye, analyst for semiconductor design and spending at IHS. “This is spurring a surge in sales of semiconductors used in wireless devices, including baseband chips, applications processors and mobile memory. With overall sales growth for PCs slowing, the balance of power in the semiconductor industry is shifting toward the wireless segment.”

Mobile Platforms vs. Computers
The wireless semiconductor spending segment consists of all OEM chip purchases for mobile devices such as mobile handsets, smartphones and media tablets. The category also includes wireless infrastructure gear like routers and base stations.

The compute segment comprises spending on chips used in computers, including notebook PCs, desktop PCs and servers. The category excludes chip spending for computer peripherals such as hard disk drives and printers.

During the past few years, the wireless and compute segments were engaged in a seesaw battle for leadership in OEM semiconductor spending. For instance, wireless led in 2008 and 2009, while the communications area took the top spot in 2010.

However, the shift in market focus toward mobile platforms, and the limited growth potential of the computer market, means that wireless is set to remain the top OEM semiconductor segment for the foreseeable future.

Nonetheless, compute applications will remain a major segment for OEM semiconductor purchasing. And although tablets are cannibalizing the computer space, notebook sales are still expanding. Partly because of the growth in notebooks, computer-related semiconductor purchasing is not set to shrink significantly in the immediate future.

Apple Drives Semiconductor Purchasing Trends
Beyond the rise of wireless, OEM semiconductor spending trends also reflect the ascendance of Apple. Apple in 2010 became the world’s largest OEM semiconductor buyer for the first time ever, surpassing perennial leader Hewlett-Packard Co.

Although Apple and HP have been rivals in the computer space for many years, the businesses of the two companies are fundamentally different. Apple is much more of a wireless device seller than a computer maker, spending approximately 61 percent of its chip budget in 2010 on wireless products such as the iPhone and iPad. In contrast, HP in 2010 devoted 82 percent of its chip spending to computer products like desktops, notebooks and servers.

Thus, the supremacy of wireless as an OEM semiconductor spending category also is partly a consequence of Apple’s domination of hot mobile markets—and its primacy in the electronics supply chain. Apple is set to increase its lead in semiconductor purchasing over HP in 2011 and 2012.

IHS iSuppli

7 comments on “OEMs to Spend More on Semiconductors for Wireless than for Computers

  1. _hm
    August 15, 2011

    Do you consider tablet like iPAD2 to be wireless or computer or both? Is not this differentiation intricate?

  2. itguyphil
    August 15, 2011

    _hm,

    I consider it to be a mobile computing device. IT has wireless capabilites and alot of the funcitonality of a traditional computer BUT not all. So, the differentiation is apparent but there are alot of areas where it overlaps.

  3. _hm
    August 15, 2011

    @pocharle – I consider it depends on user and its need. For old person, house wife or kid – this may be computing device. For professional with higher computing needs, this may be alternate wireless device. The differentiation is quite blurred.

    We sholud look more for total semiconductor usage in computer/tablet/mobile devices as it will be increasingly difficult to account them seprately.

     

  4. t.alex
    August 27, 2011

    Yes it is a it hard to differentiate between wireless and computer semiconductor in this case. What are they reducing at the computer side and spending more on the wireless side?

  5. electronics862
    August 31, 2011

    It's hard to differentiate the pool of computer/entertainment devie such as ipad, tablet. Each has its own specific application and it differs from the age group who using it. When comes to younger generation they are interested in ipad more than computers. If you come to academic environment you need computer more than other.

  6. Wale Bakare
    September 21, 2011

    Well computer side literally  –  input devices, processing (control and logic units) and output devices. Wireless semiconductors – bluetooth,  lan card and others.

  7. t.alex
    September 24, 2011

    The most probable reason is they are gonna equip every device with wifi or mobile broadband capability.

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