Q4 reprieve brings little relief to semiconductor makers in 2012—but spurs 2013 rebound

USA: Despite stronger-than-expected growth during the fourth quarter, 2012 was still a miserable year for the semiconductor market and suppliers, with only eight out of the Top 25 chipmakers managing to eke out revenue growth—but nine suffering double-digit declines.

Global semiconductor revenue in 2012 declined by 2.2 percent from 2011, according to final results from the IHS iSuppli Competitive Landscaping Tool (CLT). The preliminary forecast issued by IHS in December projected a drop of 2.3 percent.

The modest improvement in the final results came from year-over-year growth in the fourth quarter that came in slightly better than estimated, topping out at a 2.8 percent increase. The preliminary estimate had predicted a 1.9 percent expansion.

“The last three months were the only quarter in 2012 that generated a year-over-year increase in semiconductor market revenue, but that growth was too little and too late to salvage a terrible year for chipmakers,” said Dale Ford, senior director at IHS.

“Even so, the stronger performance in the fourth quarter represents a positive signal for the semiconductor market, marking the beginning of a new growth cycle in the industry that will be sustained though 2013. IHS predicts global semiconductor revenue will rise by 5.6 percent in 2013, bringing an end to the slump of 2012.”

Semiconductor body count
Semiconductor industry growth in 2012 slipped from stagnation in the first half to a slump in the second half, widely affecting various players in the market.

Among the Top 25 suppliers, the only companies to expand revenue in 2012 were No. 2 Samsung, No. 3 Qualcomm, No. 9 Broadcom, No. 11 Sony, No. 14 NXP, No.15 nVidia, No.18 MediaTek and No. 24 LSI, as presented in the attached table.

The remaining 17 suppliers suffered revenue declines. Companies whose revenue fell by double-digit percentages were No. 4 Texas Instruments, No. 5 Toshiba, No. 6 Renesas, No. 8 STMicroelectronics, No. 12 Advanced Micro Devices, No. 16 Freescale, No. 17 Elpida, No. 21 Panasonic and No. 22 On Semiconductor.

“The semiconductor downturn had an extremely broad impact, as global economic uncertainty and weakness affected companies across all regions as well as the vast majority of products and application markets,” Ford observed. “Almost every major semiconductor product market suffered a decline in 2012, with double-digit drops in the major memory and discrete categories.”

Merger dirge
With semiconductor suppliers’ financial condition so weak, merger and acquisition (M&A) activity among the top companies was nearly non-existent in 2012—a stark contrast to the high level of activity seen in 2011.

The only major purchase was Samsung’s acquisition of a 100 percent share of the Samsung LED business from Samsung Electro-Mechanics. The results of all other top companies were not meaningfully impacted by M&A activity.

Silver linings playbook
While there was plenty of bad news in the 2012 semiconductor market, the most dramatic change for any single semiconductor supplier was actually a positive development: Qualcomm’s nearly 30 percent surge in revenue.

Qualcomm’s revenue growth of 29.2 percent launched it to the No. 3 rank in the global semiconductor market in 2012, up from No. 6 in 2011.  Its share of the semiconductor market grew by a full percentage point to 4.3 percent, up from 3.3 percent.

“In two years, Qualcomm has risen from No. 9 to No. 3 in the semiconductor rankings,” Ford noted. “This is the strongest ascension through the top ranks by any semiconductor company in recent history. Qualcomm continues to capitalize on the robust growth of semiconductor sales to the strong market for wireless devices including smartphones and media tablets.”

Only two other companies among the Top 25 achieved double-digit growth: LSI, with 22.6 percent; and Sony, with 21.8 percent. These expansions were notable achievements in such a tough market environment.

Semiconductor surprises
The bright spots in an otherwise dismal year for semiconductor growth were found in CMOS image sensors, logic ASICs, LEDs, display drivers and sensors. Growth in CMOS image sensors hit 38.8 percent, followed by logic ASICs at 19.0 percent. LEDs also expanded in the double digits at 11.9 percent. Meanwhile, growth came in at 6.9 percent for display drivers and at 6.1 percent for sensors and actuators.

The only other categories to sustain increases were logic ASSPs and standard logic components.

“Robust growth in smartphones and media tablets was key to driving growth opportunities for logic ASICs, CMOS image sensors and sensors essential to enabling new and attractive features in the exciting wireless market. LEDs also have been boosted by their continued adoption in LCD TV backlight and general purpose lighting applications.”

Source: IHS iSuppli, USA.