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Smart phones keep IC suppliers afloat

Posted: 10 Feb 2009 ?? ?Print Version ?Bookmark and Share

Keywords:smart phone market? IC supplier? iPhone? NAND?

As the economic crisis bleeds the electronics markets and suppliers dry, the relative strength of the smart phone market is helping some companies to keep their heads above water and propelling others to impressive growth.

Take a close look at any IC supplier that is still showing revenue growth and, more often than not, the smart phone market deserves at least part of the credit.

A new study released by market research firm Forward Concepts Inc. projects that smart phone shipments will grow 13 percent in 2009, reaching 164 million units. That growth rate is down from an estimated 19 percent in 2008, but compared to projections for other electronics markets this year it qualifies as scorching.

Defying gravity
Apple Inc., maker of the iPhone, seemed to defy gravity last month when it reported a 6 percent increase in sales for the quarter ended Dec. 31, 2008. The company posted saw its profit for the quarter grow to $1.61 billion from $1.58 billion in the same period a year earlier.

Apple is set apart from the rest of the electronics world in many ways, and the company attributed its at least partly to record sales of iPod video and music players and a collapse in prices for commodity components such as DRAMs, LCDs and NAND flash. Still, the iPhone continues to enjoy phenomenal success, becoming the top selling handset among adult consumers in the United States during Q3 08.

With 9.6 percent market share, Apple was the No. 3 supplier of smart phones in 2008, trailing Nokia and Research in Motion (RIM), according to Forward Concepts.

Nokia last month reported a worse-than-expected drop in Q4 profit and warned market volumes would shrink 10 percent this year as the economic slowdown hits consumer spending. But the company is placing more emphasis on higher-margin smart phones, such as the 5800 XpressMusic device, which the company said moved more than 1 million units within three months of its launch last fall.

In its most recent quarterly report, for the three months ended Nov. 29, 2008, RIM reported revenue of $2.78 billion, up 8 percent sequentially and 66 percent year-to-year. BlackBerry subscriber accounts grew by about 14 percent to 21 million during the quarter, RIM said. The company's current quarter is scheduled to close Feb. 27.

Taiwanese smart phone maker HTC Corp., which brought to market the first phone based on Google Inc.'s Android OS last year, said last week that it expects to post a small gain in Q1 revenue but that momentum could pick up by the second quarter on new products, according to a Reuters report.

Suppliers' gain
The relative success of smart phones is propping up the fortunes of firms who make components for them.

Last week, Synaptics Inc., the No. 1 supplier of touchscreen controllers according to Forward Concepts, reported record revenue and profit for the three months ended Dec. 31, 2008. Revenue for the period climbed to $141.5 million, up 43 percent from the comparable period a year earlier. The company posted a net income of $21.2 million, or 60 cents per diluted share, up 49 percent y-on-y.

"In spite of the current macroeconomic environment, we posted the highest quarterly revenue, net income and earnings per share in our history, driven by 43 percent revenue growth year-over-year," said Francis Lee, Synaptics chairman and CEO, in a statement. Lee added that the company's performance in handheld markets more than offset a small decline in PC-based revenue.

Teardown analyses have uncovered Synaptics' capacitive touchscreen overlays in a variety of the hottest smart phones, including the BlackBerry Storm 9530 and HTC's G1, as well as other leading products such as iPods. Andrew Rassweiler, teardown manager at iSuppli Corp., said last month that Synpatics had been getting edged out of phones, but that the firm now thinks the company will show up in other handsets.

Skyworks Solutions Inc., which makes a power amplifier module found in iPhones and others, reported Feb. 5 that revenue for its most recent quarter was flat at $210.2 million, but the company beat analyst expectations with GAAP earnings per share of 13 cents. The company said it expects revenue and profit to decline during the current quarter.

Linear Technology Corp., another iPhone supplier, posted a profit of $84.2 million for its most recent quarter, though that was down about 10 percent from the same period a year earlier. Revenue for the quarter declined 14 percent.

iSuppli last year projected that shipments of MEMS for mobile handsets and smart phones would grow at a compound annual rate of 34.4 percent from 2007 through 2012, thanks largely to the success of the iPhone and competitive offerings.

Still in red
Larger, more diversified companies are also being buoyed by smart phone success, though the results are less dramatic.

Samsung Electronics Co. Ltd, which supplies the iPhone's applications processor, last month reported its first ever quarterly loss, $682 million. Infineon Technologies AG, which makes the iPhone 3G's digital baseband processor, on Friday posted a loss of loss of 102 million euro ($132 million), for its most recently concluded quarter.

But Will Strauss, principle analyst at Forward Concepts, noted that both companies results were weighed down heavily by the memory sector (Infineon through continued write downs associated with its DRAM spinout, Qimonda AG). "Both companies cases they are doing quite well in markets other than memory," Strauss said.

Still other suppliers, particularly memory houses, are sinking despite their presence in some of the hottest smart phone handsets.

Qualcomm Inc. and Broadcom Corp., which each have a large presence in smart phone handsets, are also suffering, though the companies are diversified into other product areas, including lower margin handsets. Qualcomm posted a profit of $341 million for its most recently concluded quarter, down 56 percent year-to-year. Broadcom swung to a net loss of $159.2 in its most recently concluded quarter after reported a profit of $90 million in the same period a year earlier. Both companies cut their near-term outlooks.

Mixed-signal chip supplier Wolfson Microelectronics, a supplier to the iPhone and others, Wednesday reported dramatic plunges in revenues and profits in the last quarter of 2008 due to a decline in demand.

Silicon Storage Technology Inc., which supplies serial flash chips for the iPhone, saw its Q4 revenue plummet to $58.4 million, down 36 percent sequentially and 45 percent y-on-y.

- Dylan McGrath
EE Times





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