A forgettable year for memory chip makers

Paul Boughton

For memory chip makers, 2008 will go down as a year to forget, as a major downturn in this segment caused revenue to fall for nearly all suppliers and contributed to negative results for the overall semiconductor industry, according to preliminary market-share figures from iSuppli Corp.

“Global semiconductor revenue is expected to decline by 2 per cent in 2008 due to a 16.9 per cent plunge in sales of memory Integrated Circuits (ICs), said Dale Ford, senior vice president, market intelligence services, for iSuppli. “Only two out of the Top 29 memory IC suppliers, ie companies that are expected to earn roughly $100 million or more in 2008, will see their memory IC revenue grow in 2008. For the memory IC business, 2008 can only be described as disastrous.”
If memory revenue was excluded from the total semiconductor market in 2008, the remaining chip industry would grow by 2 per cent in 2008, according to iSuppli’s preliminary estimate. Memory will account for 17.9 per cent of global semiconductor revenue in 2008.

However, the downturn in semiconductor revenue in 2008 is not entirely limited to memory suppliers. Six of the Top 10 semiconductor suppliers are expected to suffer revenue declines in 2008, including some companies that are not focused on memory: Texas Instruments Inc of the United States and Renesas Technology Corp. and Sony Corp of Japan.

“In the face of increasingly negative economic news, orders for semiconductors have virtually stopped, leading to great fear and uncertainty throughout the entire semiconductor industry,” Ford noted.

Among the world’s Top 20 semiconductor suppliers, the memory IC suppliers will experience some of the largest declines in revenue, according iSuppli’s preliminary ranking. The worst performer among the Top 20 chip suppliers is expected to be South Korean memory chip maker Hynix Semiconductor Inc. whose revenue is set to drop by 29.1 per cent in 2008. This $2.6 billion revenue decline is expected to cause Hynix's global semiconductor ranking to fall by three positions to ninth place in 2008, down from sixth in 2007.

Another memory supplier among the Top 20 semiconductor makers, Micron Technology Inc. of the United States, is set for a 9.2 per cent revenue decrease in 2008, causing its ranking in the overall semiconductor market to slip by one position to 16th place. The world’s largest memory IC supplier and the globe’s No 2 chipmaker, Samsung Electronics Co Ltd. of South Korea, is set for a 9.1 per cent revenue decline for the year.

Japanese memory supplier Toshiba Corp is set to undergo a 5.9 per cent decline in overall semiconductor revenue in 2008, but the company will maintain its fourth-place ranking.
Among the world’s Top 10 memory IC suppliers, the largest declines in revenue will be suffered by Germany’s Qimonda AG, with a plunge of 40.7 per cent; Hynix, with its 29.1 per cent drop; Taiwan’s Nanya Technology Corp., with another 29.1 per cent decrease and Powerchip Semiconductor Corp, also of Taiwan, with a 23.4 per cent reduction.

The year 2008 will mark the second consecutive annual revenue contraction in global memory IC revenue, following a 3.9 per cent decline in 2007.

Every memory segment will decline in 2008, with DRAM leading the way down, at a 19.8 per cent decline in revenue. NOR-type flash memory will suffer a 16.2 per cent drop and SRAM revenue will decline by 16.1 per cent.

NAND-type flash memory, commonly used for data storage in products like Personal Media Players (PMPs), will fare slightly better than the other major memory types, with a 13.1 per cent decrease in revenue. However, this is the first time in the history of the NAND flash market that revenue will decline on an annual basis.
The impact of the memory market decline is evident in the overall performance of companies headquartered in the Asia/Pacific region. As a group, these companies are expected to see their revenue contract by 11.2 percent, according to iSuppli’s preliminary estimate.

The region’s share of global semiconductor revenue will decline to 16.8 per cent in 2008, down from 18.5 per cent in 2007.

Japanese semiconductor companies also are expected to see their collective revenues decline by 1.1 per cent. iSuppli projects that companies headquartered in the Europe, Middle East and Africa (EMEA) and the Americas will see their revenue grow by 0.8 per cent and 0.5 per cent respectively in 2008.

“About the only good thing that can be said about the 16.9 per cent decline in memory revenue in 2008 is that it pales in comparison to the 48.2 per cent plunge in 2001,” Ford said. “However, the dot-com-bust decline in 2001 was preceded by a 42.7 per cent surge in 2000.”

Looking beyond memory, a few segments of the semiconductor industry are expected to experience strength in 2008.

The Programmable Logic Device (PLD) market is set to enjoy healthy growth in 2008 with revenue increasing by 7.6 per cent. This market is led by U.S. suppliers Xilinx Inc, with expected 6.5 per cent growth in 2008, and Altera Corp, whose PLD revenue is set to rise by 12.1 per cent.

Optical components are expected to achieve 6.2 per cent global revenue growth in 2008. Major companies expected to benefit from the healthy expansion in this market in 2008 are Sharp Electronics, Panasonic, Avago Technologies, Samsung and Hamamatsu Photonics.

Revenue for the global microprocessor market — led by Intel Corp  - is expected to grow by 5.7 per cent in 2008. US-based Intel, the world’s largest semiconductor supplier, will outperform the overall market with a 0.4 per cent increase in total revenue.

Other semiconductor categories that are expected to enjoy relatively strong growth in 2008 are microcontrollers, with a revenue increase of 3.3 per cent, and logic application-specific ICs with a 3 per cent rise.
Based on its expected revenue growth of 19.6 per cent, Qualcomm Inc is expected to jump five places to number 8 in the rankings in 2008, up from number 13 in 2007, marking its inaugural entry into the annual semiconductor Top10. Qualcomm of the United States will be the first fabless semiconductor company to enter the ranks of the annual Top 10.

The strongest performer among the Top 20 in 2008 will be Broadcom Corp, another US fabless company, which is expected to achieve growth of 26.4 per cent. This will propel it up the ranks by five positions, rising to 14th place, up from 19th in 2007.

The creation of the ST-NXP Wireless joint venture in 2008 is having a notable impact on the growth of STMicroelectronics and NXP.

iSuppli has consolidated all revenues from this new business under STMicroelectronics and this added revenue is expected to help the company to achieve 7.1 per cent growth in 2008.

On the other hand, the separation of this business will contribute to an expected decline of 23.9 per cent in NXP revenue in 2008, causing its rank to fall to 17th place, down from 11th before.
For more information, www.isuppli.com