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Comment: Is IC industry poised for consolidation?

Posted: 07 Apr 2010 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? semiconductor industry? IC consolidation? NAND flash?

The inevitability of semiconductor industry consolidation seems to be widely accepted. Hitachi and Mitsubishi combine to form Renesas; next Renesas and NEC combine; AMD acquires ATI; etc. Articles discussing the consolidation that has already occurred seem to appear everywhere, with dire forecasts for the future.

Yet the data show exactly the opposite. According to my chief market researcher, Merlyn Brunken, the semiconductor industry has been slowly "deconsolidating" since the 1960s. Consider the market share of the No. 1 semiconductor supplier, Intel. Intel's market share is the same today, about 13 percent, as the No. 1 supplier was 35 years ago when it was Texas Instruments. In between, NEC was No. 1. The names have changed but the market shares haven't.

What about the combined market shares of the top five semiconductor suppliers? That percentage has been slowly declining since the 1960s and is about 33 percent in the most recently reported data, less than the 35 percent reported in 1972. And the combined market share of the top 10? Also decreasing, albeit very slowly, from 48 percent in 1972 to 46 percent in 2008.

Semiconductor Concentration of Revenue (Click on image to enlarge.)

We might speculate that consolidation has been focused on companies in the manufacturing-intensive part of the semiconductor industry, like the DRAM industry, especially during the past decade. The data show, however, that the market shares of the top one, three, five and ten DRAM suppliers have all decreased since the turn of the century. Did they consolidate earlier? Not in the last 25 years. In fact, the market shares of the top one, three and five DRAM suppliers are exactly the same today as in 1983 (the earliest year for which I have DRAM data) and the top ten have modestly less market share than in 1983.

DRAM Concentration of Revenue (Click on image to enlarge.)

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