Faltering Memory Hurts Global Semiconductor Market

Staff -- Semiconductor International, 3/19/2008 3:48:00 PM

An unexpectedly weak memory market last quarter has thrown iSuppli Corp. (El Segundo, Calif.) for a loop, causing the analyst firm’s global semiconductor market 2007 predictions to come up short.

Memory was also largely to blame in September last year when iSuppli reduced its 2007 chip forecast from 6% to 3.5% growth over 2006. Gary Grandbois, principal analyst with iSuppli, cited a 13% sequential revenue decline for memory ICs in the first half of 2007 as the key contributing factor at that time. But then in November, iSuppli revised its forecast back upward, predicting 4.1% growth instead. As it turns out, the September revision was more accurate, since the final number that iSuppli is now quoting for 2007 is 3.3%.

Although the memory market had not been doing as well as one might hope, iSuppli had still estimated 1.2% growth for the sector in 2007. However, in the fourth quarter, worldwide DRAM revenue fell by 19.1%, compared with iSuppli’s earlier prediction of a 4.7% decline. NAND flash revenue declined by 3.9% in the same quarter, contrary to iSuppli’s forecast of 3% growth. The overall fourth-quarter decline of 11% for the memory market spelled trouble for total chip market growth.

iSuppli’s previous estimates for memory chip revenue relied heavily on fourth-quarter guidance presented by semiconductor suppliers in their communications with the investment community in October and November, according to the statement that iSuppli released today. “This was a complete role reversal for memory semiconductors compared to 2006,” said Dale Ford, senior vice president, market intelligence, for iSuppli, in the statement. “During the second half of 2006, memory IC revenues helped to prop up the growth of the overall semiconductor industry. In 2007, the poor results for memory chips restrained overall market growth. If memory were excluded from the revenue total, the semiconductor market would have grown by 2.4% in the fourth quarter. However, due to the influence of the weak memory market, total semiconductor market revenues fell by 0.5% in the fourth quarter.”

Weak market conditions had a major impact on most memory suppliers in 2007, including Nanya Technology and Qimonda, which saw their memory IC revenues fall by 32.4% and 26%, respectively, for the year. The world’s leading supplier of memory chips, Samsung Electronics Co. Ltd., experienced a decline of 3.3% in its memory semiconductor revenue in 2007 — contributing to a 0.8% decline in total chip revenue for the year.

A few exceptions to the weak memory segment included Hynix Semiconductor Inc., Toshiba Corp. and Elpida Memory Inc., which achieved memory-chip revenue growth of 15, 14.5 and 8.8%, respectively, in 2007.

Outside of the memory segment, several companies and product categories posted impressive performances. Infineon Technologies AG in 2007 jumped to the world’s No. 9 ranking among global semiconductor suppliers, up from 15th in 2006. Infineon returned to the Top 10 rankings with a revenue rise of 21.1% compared to 2006 due a combination of organic expansion and new revenues from recent acquisitions.

Source: iSuppli Corp. March 2008

Sony Corp. achieved extraordinary growth of 55.5% in 2007, propelling it to No. 8 in the global rankings, up from No. 14 in 2006. The key factor behind this growth was demand for chips for Sony’s own PlayStation 3 (PS3) video-game console.

Toshiba also benefited from supplying chips for the PS3 as well as its success in NAND flash memory. The Tokyo-based semiconductor supplier attained the third-highest revenue growth among the Top 10 suppliers in 2007 with an increase of 20.2% from 2006. This has positioned Toshiba to vie with Texas Instruments for the world’s No. 3 rank in 2008.

Logic application-specific ICs (application-specific standard products and ASICs) enjoyed the strongest performance of all semiconductor segments in 2007, with growth of 12.9%. Sony and Toshiba were the key drivers of growth in this segment due to their sales of semiconductors for the PS3. Among the Top 10 suppliers in this market, nVidia Corp. also achieved an outstanding year.

With the exception of Sony, it was two U.S. fabless semiconductor supplier — Qualcomm Inc. and nVidia — that led the growth among the Top 25 chip companies during 2007. Qualcomm’s revenues grew by 24.1% as it moved up three positions in the rankings to reach 13th place. For the first time, a position in the Top 10 is within reach of a fabless semiconductor supplier. nVidia achieved revenue growth of 34.4% and leaped from No. 25 to No. 20 in the rankings. nVidia’s revenues also received an additional boost from its acquisition of PortalPlayer during 2007.