But experts dub the lead as flash in the pan even as worldwide semiconductor revenue grew impressively in 2017, though slowdown predicted for 2018
A major shake-up in global semiconductor pecking order has taken place and Samsung has done what was once considered an almost impossible task – displacing Intel as the undisputed leader of the global semiconductor business – the first time Intel has been toppled since 1992. But experts doubt the lead to last long terming it as ‘flash in the pan’ fuelled by transitory but sharp surge in the price of memory silicon. Memory accounted for more than two-thirds of all semiconductor revenue growth in 2017, and became the largest semiconductor category.
In the meanwhile, it’s a been a good year for semiconductor industry. According to a preliminary result by Gartner Inc, worldwide semiconductor revenue totalled USD419.7 billion in 2017, a 22.2 percent increase from 2016. Undersupply helped drive 64 percent revenue growth in the memory market, which accounted for 31 percent of total semiconductor revenue in 2017.
“The largest memory supplier, Samsung Electronics, gained the most market share and took the No. 1 position from Intel – the first time Intel has been toppled since 1992,” said Andrew Norwood, Research Vice President at Gartner.
“Worldwide semiconductor revenue totalled USD419.7 billion in 2017, a 22.2 percent increase from 2016. Under supply helped drive 64 percent revenue growth in the memory market, which accounted for 31 percent of total semiconductor revenue in 2017”
The key driver behind the booming memory revenue was higher prices due to a supply shortage. NAND flash prices increased year over year for the first time ever, up 17 percent, while DRAM prices rose 44 percent.
Equipment companies could not absorb these price increases so passed them onto consumers, making everything from PCs to smartphones more expensive in 2017.
Other major memory vendors, including SK Hynix and Micron Technology, also performed strongly in 2017 and rose in the rankings (see Table 1).
Table 1. Top 10 Semiconductor Vendors by Revenue, Worldwide, 2017 (Millions of US Dollars)
|2017 Rank||2016 Rank||Vendor||2017 Revenue||2017 Market Share (%)||2016 Revenue||2016-2017 Growth (%)|
Source: Gartner (January 2018)
Second-placed Intel grew its revenue 6.7 percent in 2017, driven by 6 percent growth in data center processor revenue due to demand from cloud and communications service providers. Intel’s PC processor revenue grew more slowly at 1.9 percent, but average PC prices are on the rise again after years of decline following the market’s shift from traditional desktops toward two-in-one and ultramobile devices.
The current rankings may not last long, however, “Samsung’s lead is literally built on sand, in the form of memory silicon,” said Mr Norwood. “Memory pricing will weaken in 2018, initially for NAND flash and then DRAM in 2019 as China increases its memory production capacity. We then expect Samsung to lose a lot of the revenue gains it has made.”
|“Samsung’s lead is literally built on sand, in the form of memory silicon.Memory pricing will weaken in 2018, initially for NAND flash and then DRAM in 2019 as China increases its memory production capacity. We then expect Samsung to lose a lot of the revenue gains it has made” – – Andrew Norwood, Research Vice President at Gartner|
2017 was a relatively quiet year for mergers and acquisitions. Qualcomm’s acquisition of NXP was one big deal that was expected to close in 2017, but did not. Qualcomm still plans to complete the deal in 2018, but this has now been complicated by Broadcom’s attempted takeover of Qualcomm.
“The combined revenues of Broadcom, Qualcomm and NXP were $41.2 billion in 2017 — a total beaten only by Samsung and Intel,” said Mr Norwood. “If Broadcom can finalize this double acquisition and Samsung’s memory revenue falls as forecast, then Samsung could slip to third place during the next memory downturn in 2019.”
Worldwide semiconductor revenue is forecasted to total USD451 billion in 2018, an increase of 7.5 percent from USD419 billion in 2017, according to Gartner, Inc. This represents a near doubling of Gartner’s previous estimate of 4 percent growth for 2018.
“Favorable market conditions for memory sectors that gained momentum in the second half of 2016 prevailed through 2017 and look set to continue in 2018, providing a significant boost to semiconductor revenue,” said Ben Lee, Principal Research Analyst at Gartner. “Gartner has increased the outlook for 2018 by USD23.6 billion compared with the previous forecast, of which the memory market accounts for USD19.5 billion. Price increases for both DRAM and NAND flash memory are raising the outlook for the overall semiconductor market.”
However, these price increases will put pressure on margins for system vendors of key semiconductor demand drivers, including smartphones, PCs and servers. Gartner predicts that component shortages, a rising bill of materials (BOM) and the resulting prospect of having to raise average selling prices (ASPs) will create a volatile market through 2018.
Despite the upward revision for 2018, the quarterly growth profile for 2018 is expected to fall back to a more normal pattern with a mid-single-digit sequential decline in the first quarter of the year, followed by a recovery and buildup in both the second and third quarters of 2018, and a slight decline in the fourth quarter.
“Despite the upward revision for 2018, the quarterly growth profile for 2018 is expected to fall back to a more normal pattern with a mid-single-digit sequential decline in the first quarter of the year, followed by a recovery and buildup in both the second and third quarters of 2018”
On January 3, a security vulnerability that spans all microprocessor vendors was revealed, impacting nearly all types of personal and data center computing devices. While this is an obscure security vulnerability that is difficult to achieve, the potential of a high-impact security issue cannot be ignored and must be mitigated.
“The current mitigation solution is via firmware and software updates, and has a potential processor performance impact. This may result in an increased demand for high-performance data center processors in the short term, but Gartner expects that in the longer term, microprocessor architectures will be redesigned, reducing the performance impact of the software mitigations and limiting the long-term forecast impact,” said Alan Priestley, Research Director at Gartner.
“Field-programmable gate array (FPGA), optoelectronics, application-specific integrated circuits (ASICs) and nonoptical sensors will lead the semiconductor device categories in 2018”
Taking the memory sectors out of the equation, the semiconductor market is forecast to grow 4.6 percent in 2018 (compared with 9.4 percent in 2017) with field-programmable gate array (FPGA), optoelectronics, application-specific integrated circuits (ASICs) and nonoptical sensors leading the semiconductor device categories.
The other significant device category driving the 2018 forecast higher is application-specific standard products (ASSPs). The predicted growth in ASSPs was influenced by an improved outlook for graphics cards used in gaming PCs and high-performance computing applications, a broad increase in automotive content and a stronger wired communications forecast.
The mixed fortunes of semiconductor vendors in recent years serves as a reminder of the fickleness of the memory market,” said Mr Lee. “After growing by 22.2 percent in 2017, worldwide semiconductor revenue will revert back to single-figure growth in 2018 before a correction in the memory market results in revenue declining slightly in 2019.”