Percentage of Semis Consumed by Top OEMs Increased in 2008, Expected to Decrease in 2009

The top 100 OEMs consumed more than three quarters of all semiconductors sold in 2008 at 79 percent or $202 billion, according to data released from Gartner Inc.

While the percentage of units bought by the top 100 OEMs in 2008 was up from 2007's 76 percent, total value was down from 2007's $209 billion, illustrating price erosion and demand issues that plagued the electronics industry last year and that have continued into 2009.

Gartner reported that the top application areas remained data processing and communications electronics, which represented almost three quarters of the semiconductors consumed by the top 100 OEMs in 2008.

As it did in 2007, HP led the pack with $16.5 billion in semiconductor demand, followed by Nokia, Dell, and Samsung, with more than $11 billion each. Gartner noted that these companies have strong computer and cellular phone businesses and said that in 2009 PC production is expected to decrease 11 percent and cell phone production is expected to decrease 12 percent. In addition to this, Gartner said it expects that these products will have lower-priced semiconductors, with an expected price decline of more than 10 percent for chips in each of these products. That should force a corresponding decline in the total semiconductor consumption for the top 100 branded electronics companies in 2009, the market researcher said.

"This underlines the current crisis for the semiconductor industry — significant erosion of semiconductor content and average selling prices (ASPs), especially in core markets," Alfonso Velosa, a Gartner Research Director and former Intel Commodity Specialist, wrote in Gartner's Semiconductor DQ Monday Report.

"This is the issue that semiconductor firms will need to continue to address from a technology, cost, and innovation perspective," he said.

All opportunity is not lost, however.

"We continue to see signs that new and innovative uses of semiconductors, such as sensors, are being implemented in products by firms such as Apple, Nokia, and HTC in a series of interesting new touch screen-based products. The semiconductor industry's opportunity lies in enabling the branded electronics firms to experiment and develop these products quickly enough, thus creating niche markets," Velosa concluded.

Electronic News, a sister publication of EM Asia