Intel Suffers, AMD Surges in 2006

El Segundo, CA – It was a tale of two companies in the semiconductor industry in 2006, with leading chip supplier Intel Corp. suffering a revenue decline, while rival Advanced Micro Devices Inc. (AMD) nearly doubled its sales, according to iSuppli Corp.’s final 2006 market-share ranking.

“For U.S. microprocessor giant Intel, 2006 was the worst of times, as its global semiconductor revenue dropped by 11.1 percent from 2005,” said Dale Ford, vice president, market intelligence, for iSuppli. “The revenue decline, which was due to Intel’s bleak performance in its core PC microprocessor and flash-memory businesses, erased nearly all of the company’s sales gains from its strong year in 2005. Intel’s 2006 revenue of $31.5 billion was less than half a percentage point higher than its sales in 2004.

“For Intel’s smaller U.S. rival, AMD, 2006 was the best of times as it achieved a whopping 91.6 percent increase in revenue for the year, partly due to a major acquisition, but also because of strong gains in microprocessor market share,” Ford added. This robust increase in revenue caused AMD’s ranking to rise to eighth place in 2006, up seven positions from the 15th rank in 2005.

The table below presents iSuppli’s final market-share ranking for the world’s Top-25 semiconductor suppliers in 2006.


Intel loses share to AMD

The divergent performances of Intel and AMD came during a 2006 when global semiconductor industry revenue rose by 9.3 percent to reach $260.2 billion, up from $237.98 billion in 2005. This is slightly higher than the 9 percent growth iSuppli predicted in its preliminary market share estimate compiled in November and released in early December.

Intel in 2006 faced hard times in its microprocessor and flash-memory businesses, which together accounted for 83 percent of total company revenue last year. The company’s combined microprocessor and flash revenue in 2006 fell to its lowest level since 2003 as Intel faced rising competitive pressure in those markets. The revenue decline resulted in Intel’s market share falling to 12.1 percent, its lowest level since before 2000.

Meanwhile, AMD in 2006 gained PC microprocessor market share at Intel’s expense. AMD’s PC microprocessor revenue rose by 35.5 percent in 2006 and its market share in that product segment increased to 16.1 percent, up 5 percentage points from 11.1 percent in 2005. AMD’s revenue also was boosted substantially by its acquisition of graphics chip seller ATI Technologies in 2006.

Thanks for the memories
Looking beyond Intel and AMD, 2006 was a banner year for the leading pure-play memory chip suppliers. Memory supplier Hynix Semiconductor Inc. of South Korea leapt to the seventh-place position in 2006, up from 11th in 2005 as its revenue surged by an impressive 41.5 percent. Hynix’s memory revenue growth of $2.3 billion surpassed the $1.8 billion memory sales increase posted by memory-chip leader Samsung Electronics Co. Ltd. in 2006.

Germany’s Qimonda AG, a newly created pure-play memory company formed from the spin-off of Infineon AG’s memory business, increased its revenue by 54.9 percent in 2006. However, the fastest growing memory supplier in 2006—and the quickest-expanding supplier among the world’s top-25 chip sellers—was Japan’s Elpida Memory Inc. Elpida’s revenue nearly doubled in 2006, rising by 98.6 percent from 2005. This caused the company’s ranking to rise to 19th in 2006, up from 28th in 2005.

Other notable increases were posted by Taiwan’s ProMos Technologies Inc., Nanya Technology Corp. and Powerchip Semiconductor Corp. as well as by U.S.-based Spansion LLC. Memory ICs were the key segment driving the growth of the overall semiconductor industry in 2006, with revenue in this area rising by 22.7 percent. A stronger-than-anticipated revenue increase in the fourth quarter boosted annual growth for DRAM to 35.2 percent in 2006.

Other 2006 winners

Texas Instruments Inc. in 2006 achieved the strongest growth among the top-five semiconductor suppliers with a 17.3 percent increase in revenue for the year. The company benefited from strong sales of baseband chips, as well as digital signal processors. Beyond AMD, Hynix, Elpida, and Spansion, three other companies among the top-25 achieved growth of more than 24 percent in 2006: Qualcomm Inc., Broadcom Corp. and nVidia Corp.

Top-10 shifts
Hynix’s and AMD’s ascension to the first-tier semiconductor ranks in 2006 displaced two companies that had been among the Top-10 reaching back to at least the early 1990s: Infineon and NEC Electronics Corp. Infineon dropped out of the Top 10 in 2006 due to the spin-off of its memory business to form Qimonda. If Infineon and Qimonda had not been split in 2006, the combined company would have seen its revenue grow by 26.9 percent and it would have risen to fourth place, up from sixth in 2005. As separate companies, Qimonda finished the year ranked at No. 12 and Infineon in 14th place.

NEC suffered a 0.5 percent decline in revenues and dropped to 11th place, down from eighth in 2005. Besides Intel and NEC, the only other companies among the top 25 to experience decreases in revenue in 2006 were Renesas Technology Corp., Matsushita Electric Industrial Co. and Rohm Corp., with declines of 2.6 percent, 2.6 percent and 0.9 percent respectively. Infineon’s revenue decline is not included in this count since its decrease in revenue was due to the Qimonda spin-off.

Other notable findings from iSuppli’s final semiconductor market-share estimate for 2006 include:

• Out of 250 companies measured in iSuppli’s semiconductor market-share research, 190 companies, or 76 percent, achieved growth in 2006. Of this number, 128 companies attained double-digit growth during 2006.
• Over the last five to six years, Samsung, Hynix and Broadcom have shown the strongest consistent momentum in increasing market share among the top semiconductor suppliers. Since the first quarter of 2003, Hynix has more than doubled its annual average market share to 3 percent, up from 1.4 percent. During this same timeframe, Broadcom also doubled its market share to 1.4 percent in 2006. Samsung has increased its annual average market share to 7.6 percent, up from 4.3 percent in the first quarter of 2002.
• All of the top-five semiconductor suppliers, except Intel, exceeded the average annual semiconductor market growth rate in 2006 with at least an 11 percent expansion.