Shakeup in the top 20 semiconductor suppliers continues in 2016

By Nick Flaherty www.flaherty.co.uk

Apple's internal chip value puts it at #15

Sales at the top 20 semiconductor companies declined by 6% in the first quarter of this year as the impact of consolidation and the downturn starts to bite. 

The figures from IC Insights show that seven companies displayed a double-digit 1Q16/1Q15 decline and three that registered a dramatic 25% fall (with memory giants Micron and SK Hynix posting the worst results). Half of the top-20 companies had sales of at least $2.0 billion in 1Q16, so it takes $832 million in quarterly sales just to make it into the top 20 list.

Apple is an anomaly in the top-20 ranking with regards to major semiconductor suppliers. The company designs and uses its processors only in its own products—there are no sales of the company’s MPUs to other system makers. Apple’s custom ARM-based SoC processors had a “sales value” of $1,390 million in 1Q16, up 10% from $1,260 million in 1Q15. 

 Apple’s MPUs have been used in 13 iPhone handset designs since 2007 and a dozen iPad tablet models since 2010 as well as in iPod portable media players, smartwatches, and Apple TV units. Apple’s custom processors—such as the 64-bit A9 used in iPhone 6s and 6s Plus handsets introduced in September 2015 and the new iPhone 6SE launched in March 2016—are made by pure-play foundry TSMC and IDM foundry Samsung.

There were some surprises though - despite the doom and gloom around the prospects for growth at Intel, the company still saw significant growth against the declining backdrop. Growth star MediaTek continued to advance, but Infineon also saw healthy growth. In terms of rankings, the biggest moves in the ranking were made by the new Broadcom (Avago/Broadcom) and Nvidia, each of which jumped up three positions in 1Q16 as compared to 1Q15.

There was one new entrant into the top-20 ranking in the first quarter US fabless supplier AMD. AMD had a particularly rough 1Q16 and saw its sales drop 19% year-over-year to $832 million, which was about half the $1,589 million in sales the company logged just over two years ago in 4Q13. Although AMD did not have a good 1Q16, Japan-based Sharp, the only company that fell from the top-20 ranking, faired even worse with its 1Q16/1Q15 sales plunging by 30%

In order to allow for more useful year-over-year comparisons, IC Insights combined the acquired/merged semiconductor company sales results for both 1Q15 and 1Q16, regardless of when the acquisition or merger occurred. For example, although Intel’s acquisition of Altera did not close until late December of 2015, Altera’s 1Q15 sales ($435 million) were added to Intel’s 1Q15 sales ($11,632 million) to come up with the $12,067 million shown in the chart aboe. The same method was used to calculate the 1Q15 sales for Broadcom (Avago/Broadcom), NXP (NXP/Freescale), and GlobalFoundries (GlobalFoundries/IBM).

As would be expected, given the possible acquisitions and mergers over this years such as Microchip/Atmel and ON Semiconductor/Fairchild, as well as any new ones that may develop, the top-20 semiconductor ranking is likely to undergo a significant amount of upheaval over the next few years as the semiconductor industry continues along its path to maturity.

IC Insights will have another update on the market later in the month.

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Mergers shake up the semiconductor industry

Review of the year

By Nick Flaherty www.flaherty.co.uk

This year has seen a staggering consolidation within the semiconductor industry. With deals ranging from the merger of NXP and Freescale through Broadcom and Avago to Qualcomm and CSR, Infineon and International Rectifier and Intel absorbing Altera (which completed today), the field of suppliers in the embedded industry will change significantly by the end of next year as a result.
Other deals are continuing, with Dialog Semiconductor's acquisition of Atmel still in play, and TDK taking over Micronas.
This is highlighted in the recent figures from market researcher IC Insight. Bill McClean sees the integrated device makers (IDM) overtaking the fabless chip makers briefly, partly as a result of the mergers and partly from currency fluctuations. But it does shake up the list of the top suppliers considerably.
As shown in Figure 1, only three of the top-10 IDM semiconductor suppliers are forecast to register growth in 2015 and, in total, the top-10 IDMs are expected to display flat growth this year. says McClean.  Intel remains the dominant player, and Altera's $460m fabless business will barely make a bump in the figures as the new Programmable Solutions division. The combined NXP/Freescale is now moving up to challenge Texas Instruments, although the majority of the NXP basis is moving to fabless rather than IDM.

Top 10 IDMs for 2015 post merger. Source: IC Insights

Although flat growth by the top-10 IDMs would typically be considered poor performance, it is still forecast to be a much better result than is expected from the top-10 fabless semiconductor suppliers (Figure 2).  In order to make direct comparisons for year-over-year growth, IC Insights combined the merged, or soon to be merged, companies’ 2014 and 2015 semiconductor sales regardless of when the merger occurred, providing a more accurate figure. However, how well the companies execute on the merger will impact on this potential growth.

Figure 2: Fabless semiconductor vendors are seeing the effects of consolidation more strongly than IDMs. Source: IC Insights 

As shown, the top-10 fabless semiconductor suppliers are forecast to register a 5% decline in sales this year, five points worse than the top-10 IDMs.  It should be noted that essentially all of the decline expected for the top-10 fabless suppliers in 2015 could be attributed to the forecasted decline in Qualcomm/CSR’s sales this year, which comes from Samsung’s increasing use of its internally developed Exynos application processor in its smartphones instead of the application processors it had previously sourced from Qualcomm.

Figure 3: Flat growth in 2015 shows the semiconductor market moving into its negative cycle, with consequences for the embedded market. Source: IC Insights

All this highlights the turn in the market in figure 3. From positive growth last year to flat sales this year, the market is heading into its downward trend. This will make life difficult for embedded developers as the top ten companies in both areas cut costs and product lines to compensate, and drive more consolidation through 2016.

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