Intel remains in lead despite revenue drop

Chip makers scrabble for market positions as global semiconductor revenues decline

Intel held on to the number one slot for chip makers during 2006, but paved the way for rivals to close the gap, according to market watcher iSuppli’s 2006 market share rankings for the top 25 chip companies.

“For Intel, 2006 was the worst of times as its global semiconductor revenues dropped by 11.1 per cent from 2005,” explained Dale Ford, iSuppli’s vice president of market intelligence. “The revenue decline, which was due to Intel’s bleak performance in its core PC microprocessor and Flash memory businesses, erased nearly all of the company’s sales gains from its strong year in 2005. Intel’s 2006 revenue of $31.5bn was less than half a percentage point higher than its sales in 2004.”

He added: “For Intel’s smaller rival, AMD, 2006 was the best of times as it achieved a whopping 91.6 per cent increase in revenue for the year, partly due to a major acquisition, but also because of strong gains in microprocessor market share.”

Intel’s poor performance went against the grain as revenues for the chip market overall were $260.2bn – up 9.3 per cent from 2005’s $237.98bn.

DRam was a boom area in 2006 and the key driver for the whole semiconductor market, iSuppli said. Revenues for the sector rose by 22.7 per cent, while a surprise revenue boost for DRam in the fourth quarter of last year saw its annual growth rise to more than 35 per cent.

On the DRam chip front, Samsung continued to rule the roost, but Hynix was the star performer, jumping from eleventh to sixth place, with revenues up 41.5 per cent. Whereas Samsung recorded memory revenues of $1.8bn, Hynix turned in memory sales of $2.3bn. Germany’s Qimonda, which was spun off from Infineon last year, also hit the ground running with revenues up nearly 55 per cent and sitting in eleventh place. The biggest surprise was Japanese supplier Elpida, which nearly doubled its revenues in 2006, jumping from twenty-eighth to nineteenth place in 2006.

However, 2007 is not expected to reach the same levels as 2006 in the chip market and the signs are already beginning to appear. Market watcher Gartner has revised its global semiconductor growth rates downwards.

Richard Gordon, Gartner’s managing vice-president, said: “The semiconductor market is off to a sluggish start this year, thanks to a mild softening in end markets and an inventory surplus. We have adjusted our revenue forecast downward and now predict growth of 6.4 per cent, [down from 9.2 per cent].”