Smartphone IC market bucks overall industry decline

According to a recent report from ABI Research, the overall worldwide semiconductor revenue dropped last year to just over $200 billion, a 5 per cent decline from 2011. Fifteen of the top 20 semiconductor vendors including Intel, Samsung, Texas Instruments, and STMicroelectronics are expected to report significantly lower semiconductor product revenues for 2012.

However, a few companies have managed to buck this trend and outperform the overall market and in many cases, the continued growth of the smartphone market was greatly beneficial to their success. (See LTE smartphone vendors to sell 275M units in 2013.)

According to Peter Cooney, ABI's semiconductor practice director, revenues for platform and wireless connectivity IC used in smartphones grew by almost 30 per cent year-on-year from 2011 to 2012. This has helped companies, such as Qualcomm and Broadcom, grow despite a lackluster year for the overall semiconductor market. Competition in this market has been fierce and those with a strong market position are very well rewarded. (See Broadcom to dominate connectivity IC market in 2013.)

Revenue growth will not continue unabated, integration both in platform ICs and connectivity ICs will be a negative factor but with many high profile companies exiting the market there is still a strong potential for revenue growth for the dominant suppliers. 13 per cent revenue growth is expected in 2013 but this will slow to single-figure growth from 2014 onwards.

"In the past few years we have seen many once dominant players leave the mobile handset IC market," added Cooney. "Freescale and Texas Instruments both exited to focus on more industrial markets and STMicroelectronics recently announced that it will pull out of its joint venture with Ericsson despite increasing design wins for ST-Ericsson's Thor and NovaThor products. (See ST ends Ericsson partnership to focus on embedded.) The exit of these high profile players is indicative of the strong competition in the handset IC market, the moves by OEMs such as Samsung and Huawei to vertically integrate shows that competition can only increase."

Just last month, Singapore reported that their electronic exports declined across the board in November with ICs sinking by 21.5 per cent, PC parts dipping 20.8 per cent and IC components losing 22.4 per cent compared to the same period in 2011. Analysts suggested that this could be due to the country's lack of aggressive initiatives to address high demand for smartphones and tablets. (See Singapore not lagging behind in thriving smartphone market.)