AMD loses top ten spot in semiconductor ranking

El Segundo (CA) – AMD may leave the list of the world’s ten largest chip manufacturers as quickly as it had become part of it : iSuppli believes that AMD’s 2007 revenues will not be high enough to remain sustain its 2006 ranking, while Intel expanded its market presence, solidifying the firm’s status of the only chip manufacturer with a double-digit market share.

The acquisition of ATI helped AMD to enter the chip top 10 last year for the very first time. Ranked at #8, the company saw its revenues grow by 91.6% from $3.9 billion in 2005 to $7.5 billion in 2006. iSuppli, however, believes that the company’s 2007 sales will take a significant hit, by 22.8% to $5.8 billion. Adding insult to injury, the market research firm sees this decline to be dramatic enough to kick AMD out of the top 10 list and list it at #11 in its preliminary ranking. Only one other top 10 player, Texas Instruments, will see its revenues decline for the year, iSuppli said.

Meanwhile, Intel is estimated to bounce back, after having suffered a revenue and market share loss in 2006. Intel will gain about 7.7% from $31.5 billion to 34.0 billion in sales, which will result in a market share of 12.5%, up from 12.1% last year. Still, Intel will not be able to reach its 2005 result of $35.5 billion in revenues, iSuppli said.

“Throughout most of the year, Intel successfully defended much of the market share that it won from AMD in the first quarter in the PC microprocessor segment due to the success of its lines of dual- and quad-core chips,” said Dale Ford, vice president, market intelligence, for iSuppli. “This represents a major reversal of fortune compared to 2006, when AMD had the advantage with its popular dual-core microprocessors, allowing it to gain share from Intel.”

isupply table

Another example of how individual circumstances are determining company performance is consumer-electronics manufacturer Sony, whose semiconductor revenue is expected to rise by 56.8% in 2007, by far the highest percentage growth of all the top 20 semiconductor suppliers for the year. In contrast, overall consumer-electronics semiconductor revenue is set to increase by only 8.9% in 2007, iSuppli said. Sony’s revenue increase is nearly all due to its sales of chips for the company’s PlayStation 3 video-game console. Toshiba, which supplies semiconductors to Sony for the Playstation 3 as well, is expected to post a strong growth as well : An increase of 24.1% in semiconductor sales is the second-largest percentage increase among the top 20 chip makers.

“The PlayStation 3-driven performance of these two suppliers is the major factor propelling the world-beating growth of the Japanese semiconductor industry in 2007,” Ford said. Sony has announced a deal to transfer production of its Cell microprocessor for the Playstation 3 to Toshiba, which means that Toshiba would increase its distance from Texas Instruments as the world’s # 3 semiconductor supplier, while Sony would drop out the top 10 ranking.

Texas Instruments (TI), besides AMD, is the only top 10 manufacturer to see a revenue decline, according to the market research firm’s estimates. iSuppli said that that TI derives more than 45% of its revenue from wireless communications chips, and may suffer a 3.4% decline in global semiconductor revenue in 2007. iSuppli believes that the negative growth is mainly due to Nokia’s decision to diversify its chip supplier base. “Nokia, the world’s largest seller of mobile phones, historically has used Texas Instruments as its near-exclusive supplier of wireless baseband suppliers,” Ford said. “However, the company has engaged in a strategic initiative to add other baseband suppliers to reduce its dependency on Texas Instruments. This has benefited other companies such as Infineon, but has cut into Texas Instruments’ sales.”