Worldwide Semiconductor Market Inched up in 2007

Intel’s dominance of the semiconductor sector continues unabated as the chip giant increased its market share during 2007 to a total of 12.2 percent of the market, well ahead of Samsung, Toshiba and the other players, according to a report by Gartner.

The overall worldwide semiconductor market grew a mere 2.9 percent in revenue to $270.3 billion in 2007, with most of the firms posting single-digit growth or slight declines.

While Intel remained the biggest, it did not have the best growth of the top ten companies on Gartner’s list. That honor went to Toshiba and Hynix Semiconductor.

AMD recently warned its ATI’s unit’s consumer electronics business suffered due to an ailing mobile phone customer.

That should serve as a cautionary tale for semiconductor makers to diversify their businesses, according to Gartner analyst Gerald Van Hoy, who conducted the survey.

“Any a situation where you have all your eggs in one basket is not a good thing,” he told “Then you are dependent on someone else’s marketing, someone else’s everything. If they get their lunch eaten by anyone, it directly affects you.”

That diversity of customers was what helped Toshiba jump 27.8 percent thanks to, of all things, a 45 percent growth in its CMOS image sensors. What’s a CMOS image sensor? It’s used in mobile phone cameras, which almost every mobile phone contains these days.

Toshiba had a healthy mix of mobile phone customers, resulting in a healthy business. The company also sells chips used in HDTV sets, and that market remains strong as well. Toshiba controlled 4.6 percent of the market during 2007, with $12.5 billion in sales.

The other area of strength for Toshiba was NAND  flash memory, which has become a hot market for nearly everyone involved. Hynix Semiconductor, which makes both flash and standard DRAM, grew 20.2 percent during the year. That was enough to push it into seventh place on in the rankings.

Toshiba’s strength in NAND proved to be a major asset, since the worldwide DRAM business is far less lucrative. Van Hoy a serious oversupply of DRAM caused prices to plunge. However, he said he is surprised to see vendors increasing their capital expenditures in DRAM production, meaning they aren’t likely to stop making it anytime soon.

“Normally when there’s an oversupply, you see an easing off — but not in this case,” he said.

Intel rode the strength of the mobility market, which has been growing steadily as desktop sales slip. Rather than memory, the company’s strength comes from selling plenty of CPUs and chipsets. This resulted in $32.9 billion in sales in 2007, an 8.2 percent increase.

Intel also has a modest flash business that it is spinning off in a joint venture with STMicroelectronics, which was number five on Gartner’s list with 3.7 percent of the market dollars.

While 2007 proved rosy for a number of semiconductor makers, the outlook for 2008 is somewhat murky due to concerns about the overall state of the economy.

“The macroeconomic situation is the big thing right now,” Van Hoy said. “Right now we show that there’s a 30 percent chance of a recession, in which case the market might drop. What’s more likely, about 40 percent, is a chance for a flat year, and there’s a 10 percent chance for a robust year.”

DRAM is likely to remain in overabundance — meaning low prices — and flash will probably remain strong, he said. However, those predictions all depend on where the economy goes.

“A lot of flash is tied into consumer spending,” Van Hoy said.

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