The global semiconductor market achieved the largest dollar increase in its history in 2010, courtesy of a boom in DRAM and NAND sales that beneﬁted memory suppliers, according to a preliminary forecast from the market research ﬁrm iSuppli, now part of IHS Inc. (NYSE: IHS).
Worldwide semiconductor revenue amounted to $304 billion in 2010, up from $229.5 billion in 2009. This represents growth of 32.5 percent for the year.
Percentage growth was higher in 2001 than in 2010, when revenue rose by 36.7 percent. However, revenue grew by $74.5 billion in 2010, a record increase that shattered the previous benchmark expansion of $59.2 billion in 2001.
While many observers expected the semiconductor industry in 2010 to achieve a solid rebound following the deep drop of 2009, the actual growth far outstripped all expectations. The enormous expansion in semiconductor revenue was based on renewed demand for electronic equipment, such as computers, televisions and cell phones. However, semiconductor sales in 2010 also rose at more than three times the rate of electronics equipment revenue. This augmented growth is being driven by a range of multiplying factors, including inventory rebuilding, upward price pressure due to a supply/demand imbalance and an increase in the average semiconductor content of major electronic products.
Boom Times for Chips
The semiconductor resurgence of 2010 was both broad and deep, as illustrated by results including:
- Every major category within the semiconductor market, with the exception of NOR flash and specialty memory, achieved double-digit revenue growth in 2010.
- Despite ongoing economic turbulence and uncertainty, the semiconductor industry achieved six sequential quarters of growth through the third quarter of 2010, marking the longest period of continuous growth since 2004.
- The key DRAM and NAND flash memory market segments achieved 80 percent and 40 percent growth, respectively, leading the industry boom.
- Out of 150 leading semiconductor suppliers tracked by iSuppli on a quarterly basis, an amazing 90 percent achieved revenue growth in 2010.
Happy Memories of 2010
The tremendous growth in DRAM and NAND sales benefited the leading memory suppliers, allowing many to exceed the expansion of the overall semiconductor market in 2010.
Memory suppliers Hynix Semiconductor Inc. of South Korea and Elpida Memory Inc. of Japan achieved revenue increases of 69.3 percent 74.2 percent, respectively—the largest growth among Top 20 semiconductor companies based entirely on organic expansion. This caused Elpida’s ranking to jump five spots, rising from No. 15 in 2009 to No. 10 in 2010. Hynix advanced one place to No. 6.
Samsung Electronics Co. Ltd. of South Korea also is benefiting from the dramatic growth of the memory market. Company revenue surged 60.8 percent, causing Samsung’s market share to expand to 9.3 percent, up 1.7 points from 7.6 percent in 2009.
The Urge to Merge
Growth among individual semiconductor suppliers in 2010 also was driven by mergers and acquisitions.
Merger and acquisition activity in 2010 resulted in triple-digit growth for Renesas Electronics Corp. and Micron Technology Inc., allowing them to rise to No. 5 and No. 8 in the rankings, a jump of four and five positions, respectively. Renesas Electronics was formed by the merger of Renesas Technology Corp. and NEC Electronics Corp., which were ranked No. 9 and No. 12 in 2009 before their merger. Micron Technology completed its acquisition of Numonyx in 2010.
A deeper examination of the dramatic growth in the semiconductor market in 2010 yields some surprising insights.
Despite the relatively modest increase of worldwide car sales in 2010, the automotive semiconductor market attained 41.1 percent growth—the highest of all major chip application markets. In comparison, the second-fastest growing segment, the data processing semiconductor market, expanded by 36.7 percent largely because of the red-hot DRAM segment.
On the other hand, regardless of all the headlines showing increased smart phone shipments, the wireless communications segment saw the lowest overall growth among the major chip application markets, with semiconductor revenue rising by only 24.4 percent in 2010.
Americas Market Rises Again
In another surprising outcome, chip sales to the Americas market enjoyed the highest boost among all worldwide regions in 2010 with an expansion of 38.4 percent. After years of leading the world in expansion, the Asia-Pacific region in 2010 is projected to drop to second place in 2010, with 37.6 percent growth.
On the other hand, companies headquartered in the Asia-Pacific region will capture in 2010 the No. 2 spot in overall combined market share. As a group, Asia-Pacific companies will grow by 46.6 percent and move past the Japanese suppliers, who rose by 27.9 percent as a group, to become the second-largest regional faction of chip makers in the world following the Americas.
Semiconductor Winners and Losers
Marvell Technology Group Ltd. of the United States in 2010 achieved organic revenue growth of more than 43 percent and jumped five places to the No. 18 spot.
However, both Qualcomm Inc. and Advanced Micro Devices Inc. (AMD) of the United States, as well as Sony Corp. of Japan, experienced revenue growth notably less than the overall market and slipped three to four positions in their rankings in 2010.
After a number of years of dramatically outperforming the market, MediaTek Inc. of Taiwan fell back to earth in 2010, barely achieving revenue growth at 1.2 percent and the only company among the Top 20 to not achieve a double-digit increase. The company slipped to No. 19 in the rankings, down from No. 16 place in 2009.
With all of the market share moves among the Top 20 suppliers, only one company is at risk of completely dropping out of the list of 20. iSuppli projects that nVidia Corp. of the United States retained its ranking at No. 20. But with ROHM Semiconductor competing for the final slot among the Top 20, the final outcome should be very close.
Soft Landing in 2011
While electronics revenue is expected to continue rising in 2011, the multiplying factors that propelled growth in 2010 will lose their potency in 2011. As a result, iSuppli is projecting a soft landing for the semiconductor industry in 2011 with only a 5 percent annual increase.