Gartner Says Worldwide Semiconductor Revenue Declined $12 Billion in 2008

Friday, December 12th, 2008 
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Semiconductor Vendors Take a Severe Hit in Fourth Quarter

STAMFORD, Conn. — For only the fifth time in the last 25 years, the semiconductor industry will post a decline in revenue, with worldwide semiconductor revenue totaling $261.9 billion in 2008, a 4.4 percent decline from 2007, according to preliminary results by Gartner, Inc.

“In the last quarter of 2008, market conditions deteriorated significantly, and as the fourth quarter has progressed, many vendors have issued updated guidance for the quarter, reflecting weakening market conditions,” said Andrew Norwood, research vice president at Gartner. “Unfortunately for vendors, 2009 is going to be considerably worse. Some have compared the precipitous decline in semiconductor demand to that of the 2001 ‘dot-com’ bubble. However, unlike 2001, this economic downturn is much more broad-based and not limited primarily to the technology sector.”

“Given this increased uncertainty, all semiconductor companies should be focused on cash preservation and inventory management,” Mr. Norwood said. “While gross margin for IDMs (integrated device manufacturers) will show significant declines owing to underutilized factories, focusing on inventory now should help the recovery when demand returns. This is also an excellent opportunity for the larger companies with stronger balance sheets to make strategic acquisitions.”

Intel held the No. 1 position for the 17th consecutive year, and it increased its market share to 13.1 percent in 2008 (see Table 1). However, Gartner’s 2007 revenue includes Intel’s NOR flash memory business that was spun off in the second quarter. Comparing only continuing operations, Intel’s revenue grew 6.5 percent, beating the market average by nearly 11 percentage points.

Table 1
Top 10 Preliminary Worldwide Semiconductor Vendors by Revenue Estimates (Millions of U.S. Dollars)

2008
Rank
2007
Rank
Company 2008
Revenue
2008 Market
Share (%)
2007
Revenue
2007-2008
Growth (%)
1 1 Intel Corporation 34,187 13.1 33,800 1.1
2 2 Samsung Electronics 17,900 6.8 20,464 -12.5
3 3 Toshiba 10,510 4.0 11,820 -11.1
4 4 Texas Instruments 9,792 3.7 11,768 -16.8
5 6 STMicroelectronics 9,652 3.7 9,966 -3.2
6 5 Infineon Technologies (incl. Qimonda) 8,078 3.1 10,194 -20.8
7 8 Renesas Technology 7,849 3.0 8,001 -1.9
8 11 Qualcomm 6,463 2.5 5,619 15.0
9 7 Hynix Semiconductor 6,400 2.4 9,100 -29.7
10 12 NEC Electronics 5,889 2.2 5,593 5.3
    Others 145,180 55.4 147,586 -1.6
    Total 261,900 100.0 273,911 -4.4

Source: Gartner (December 2008)

Qualcomm experienced the strongest growth rate among the top 10 vendors, as its revenue increased 15 percent in 2008. The company was driven by strong growth the first three quarters of the year. However, Qualcomm felt the impact of the economic downturn in the fourth quarter of 2008 as carriers and OEMs reduced their inventory of CDMA-based devices and chipsets.

Hynix Semiconductor suffered the steepest decline among the top 10 semiconductor vendors in 2008, as revenue dropped 29.7 percent. Hynix was one of the companies that was hit hardest by the price drop of DRAM and NAND, which was caused by excess supply. All vendors focused on the DRAM and NAND flash markets experienced strong revenue declines due to oversupply and strong price reductions.

Another vendor that struggled during 2008 was Infineon Technologies.

“Infineon had a tough year as its memory subsidiary, Qimonda, which it is looking to divest, is becoming marginalized within the DRAM industry” Mr. Norwood said. However, not all of its problems were related to DRAM. The German manufacturer saw a boardroom coup that lead to the ousting of its CEO, Dr Wolfgang Ziebart. On a positive note, the company saw some high-profile design wins in Apple’s 3G iPhone.

Additional information is available in the Gartner report “Market Share Analysis: Preliminary Total Semiconductor Revenue, Worldwide, 2008.”