Semiconductor revenue jumps as recession recedes

Semiconductor revenue across the world rose 30.9 percent in 2010 compared with the previous year — a sign of a broad demand-driven economic recovery, according to Gartner.

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In total, semiconductor revenue for 2010 reached $299.4bn (£183.7bn), up $70.7bn on 2009's figures, the market research firm said in a report released on Monday. The figure marks the largest dollar increase in any one year for the industry, which manufactures the materials that underpin all sophisticated electronics — from laptops to cars to smart bombs.

"The industry upturn was due to the combination of pent-up demand that had built in the wake of the worldwide economic recession, and rebuilding of semiconductor inventories that were significantly depleted during the recession and early recovery," said Peter Middleton, a principal analyst at Gartner, in a statement.

Processor specialist Intel held the number-one position for 2010, with a 14-percent share of the market and revenue of $41.98bn. It was followed by memory specialist Samsung Electronics with 9.4 percent and $28.1bn, and Toshiba with 4.1 percent and $12.36bn.

Rounding out the top 10 vendors by revenue were, in order: Texas Instruments; ST Microelectronics; Renesas Electronics; Hynix Semiconductor; Micron Technology; Qualcomm; and Broadcom.

Thirty percent is simply a reflection of the bad 2009; likewise, this year's nine percent is not a bust, just a reflection of 2010's artificially high number.

– Malcolm Penn, Future Horizons

Malcolm Penn, chief executive of semiconductor analysis firm Future Horizons, agreed that the revenue increase from 2009 to 2010 and the nine-percent rise seen so far this year should be regarded in the context of the underlying economic situation.

"Thirty percent is simply a reflection of the bad 2009; likewise, this year's nine percent is not a bust, just a reflection of 2010's artificially high number," Penn said.

According to Gartner, the top 25 semiconductor suppliers accounted for 69.1 percent of total industry revenue. Of that group, commodity memory vendors such as Samsung Electronics and Hynix Semiconductor grew their revenue at 58.3 percent and 63.8 percent respectively, as a result of an overall boom in the memory market.

Capital investment

Some of the same semiconductor vendors keep their leading positions when viewed in terms of forward capital expenditure, according to figures from IC Insights.

In a report released on 7 April, the semiconductor research company said that both Intel and Samsung spent large amounts — $5.2bn and $10.9bn respectively — on semiconductor foundries and associated infrastructure in 2010. They each plan to invest around $9bn this year.

Dedicated semiconductor manufacturers TSMC and GlobalFoundries will lay out $7.8bn and $5.4bn each in 2011, up 32 and 96 percent on 2010, putting them in third and fourth place for foundry spending.

Overall, the top semiconductor industry companies are projected to increase their capital expenditure by an average of 25 percent in 2011, IC Insights said, as those who hold fabs build more "as more IC [integrated circuit] suppliers look to outsource production".

Spending on capital as a percentage of forecast sales will be around 17 percent in 2011, IC Insights predicted. However, this is not enough to tip the industry into a situation where the supply of manufacturing capacity outstrips demand. This means the sector looks set to stay in 'fab-tight' mode, making it more susceptible to price shocks from events such as the Japanese earthquake and tsunami.