Weak dollar will impact semiconductor supply chain markets

NEW TRIPOLI, USA: Since last March, the dollar has weakened considerably, which will have an impact on market share leadership, according to the report “Chemicals And Materials For Sub-100nm IC Manufacturing,” recently published by The Information Network.

Market share leadership in a business sector has strategic benefits for a company. It gives them the opportunity to issue press releases and publish pie charts in their annual reports because customers prefer to buy from them over competitors.

More significantly, it means that customers often come to them for solutions because they are more convinced by leaders. Customers look up to leaders to provide them with decisions and solutions to their needs and wants. In addition, market leadership shows the financial community that the company is worth investing in.

“A weak dollar means that goods sold in dollars are less expensive,” noted Dr. Robert Castellano, president of The Information Network. “Companies with a large portion of foreign sales will benefit as their products are cheaper, providing an impetus to buy more.”

When global market shares are compiled by us analysts, they are typically calculated in dollars. If the product is sold by a foreign company in that country’s currency, it is then converted into dollars to total up market shares. This is usually a challenge because there are a variety of methods that could be used, such as the average conversion rate throughout the year or the conversion rate on December 31.

Either will only give an estimate of dollar revenue. The only accurate way is if a company converts each sale into dollars at the time of purchase. Complicating the conversion are multinational companies who sell in different currencies in each country they have an office.

In the semiconductor equipment and materials sectors, which we analyze, market leaders held razor thin leadership positions in 2008, and exchange rates will play a big part in global positions in 2009.

Shown in the table are 2008 market share differences between the top two leaders in three major chemical and material sectors and two equipment sectors for companies who are US based versus foreign based.Source: The Information Network, USA

The differences were 2.1 percent and less. With the top leaders are in different countries, swings in exchange rates will readily tip the scale.

A weaker dollar will generally benefit US companies in the calculation of global market share because revenues generated in a foreign currency will be converted to fewer dollars.

Based on the strength of the dollar for 2009, we suspect market share leadership in to be held by Air Products, Honeywell Electronic Materials, OM Group, Lam Research, and Applied Materials. In a competitive environment, market share is sometimes also a matter of luck and dependent on customers’ performance. If a customer underperforms and stops buying, it will impact revenues of all its vendors up the supply chain.