Success In Semiconductors Boils Down To Execution
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The competitive semiconductor market comes down to a matter of execution, and that is what separates the winners from the losers in market research firm iSuppli's preliminary 2007 global semiconductor market-share estimates.
iSuppli estimates the global semiconductor market this year will grow 4.1 percent to $270.1 billion. But the variances from one vendor to the next are considerable; Sony improved 56.8 percent while AMD fell 22.8 percent. It's either feast or famine for these companies, noted Dale Ford, vice president of market intelligence for iSuppli.
"There are some real contrasts," he told InternetNews.com. "You see some real competitive dynamics in place. It's how well they are executing with their products and with their clients, and you are seeing some companies executing better than others."
Execution problems are what plagued AMD and why it fell out of the iSuppli Top 10 list. AMD had a very bad beginning of the year and has been in recovery mode ever since. "They really took it on the chin in Q1," said Ford. "That's when they lost the significant share of the market to Intel. Since Q1, they've slowly recaptured some of that share that they lost but they haven't recaptured all of it."
AMD disputed the numbers, saying it was on the low side and pointed out that there's still time left in the year to gain ground.
"It's a little early to make proclamations about the year-end revenues when the year isn't over," said Drew Prairie, a spokesman for AMD. While AMD does not give dollar projections, he said the company has projected an increase in Q4 over the $1.63 billion it recorded in the third quarter.
AMD may be down but Ford thinks the company is far from out. "Are they in a downward spiral? I would say no," he said. "Revenue-wise, market share-wise, they are not in a downward spiral. Q1 was a brutal quarter. They've introduced new products, but they will have to work hard to consolidate the gains they made in Q2 and Q3."
Sony was the biggest gainer by percentage, thanks to a big customer: itself. Sony's semiconductor business topped $8 billion for a 56.8 percent gain as it sold chips to its videogame unit for the PlayStation 3. Ford said that while the PS3 has not sold as well as expected, it still has sold a decent number of unitsand at a premium price.
Another Japanese firm, Toshiba, has done well, with a 24.1 percent increase in chip sales. Ford said it was simply a matter of Toshiba doing well in the memory and flash markets, and he expects Toshiba to do even better when it takes over manufacture of the PS3 chips from Sony. The two companies announced in October that Toshiba would purchase Sony's advanced chip operations for 100 billion yen, or roughly $858 million. The deal will close in March.
Hynix, the Korean memory manufacturer, is another winner in the memory space with 22.2 percent growth due to successful execution of its business strategy, Ford said. Infineon, which grew 14.6 percent, did a good job of recovering from losing a key customer in Siemens.