Driven by booming sales of smartphones and tablets, OEMs in 2011 will buy $55.4 billion worth of semiconductors for use in wireless devices, up 10.7 percent from $50.1 billion in 2010, according to the new IHS iSuppli Semiconductor Spend Analysis report from information and analysis provider IHS (NYSE: IHS). In contrast, OEMs will spend $53.1 billion on semiconductors used to make computers, up a scant 1.2 percent from $52.5 billion in 2010, as presented in the figure below.
Not only will wireless be the leading category for semiconductor spending in 2011, wireless will also expand its lead in 2012 as the high-technology market increases its focus on mobile, Internet-connected devices.
“Led by Apple Inc.’s iPhone and iPad, demand is booming for smart phones and tablet devices,” said Wenlie Ye, analyst for semiconductor design and spending at IHS. “This is spurring a surge in sales of semiconductors used in wireless devices, including baseband chips, applications processors and mobile memory. With overall sales growth for PCs slowing, the balance of power in the semiconductor industry is shifting toward the wireless segment.”
Mobile Platforms vs. Computers
The wireless semiconductor spending segment consists of all OEM chip purchases for mobile devices such as mobile handsets, smartphones and media tablets. The category also includes wireless infrastructure gear like routers and base stations.
The compute segment comprises spending on chips used in computers, including notebook PCs, desktop PCs and servers. The category excludes chip spending for computer peripherals such as hard disk drives and printers.
During the past few years, the wireless and compute segments were engaged in a seesaw battle for leadership in OEM semiconductor spending. For instance, wireless led in 2008 and 2009, while the communications area took the top spot in 2010.
However, the shift in market focus toward mobile platforms, and the limited growth potential of the computer market, means that wireless is set to remain the top OEM semiconductor segment for the foreseeable future.
Nonetheless, compute applications will remain a major segment for OEM semiconductor purchasing. And although tablets are cannibalizing the computer space, notebook sales are still expanding. Partly because of the growth in notebooks, computer-related semiconductor purchasing is not set to shrink significantly in the immediate future.
Apple Drives Semiconductor Purchasing Trends
Beyond the rise of wireless, OEM semiconductor spending trends also reflect the ascendance of Apple. Apple in 2010 became the world’s largest OEM semiconductor buyer for the first time ever, surpassing perennial leader Hewlett-Packard Co.
Although Apple and HP have been rivals in the computer space for many years, the businesses of the two companies are fundamentally different. Apple is much more of a wireless device seller than a computer maker, spending approximately 61 percent of its chip budget in 2010 on wireless products such as the iPhone and iPad. In contrast, HP in 2010 devoted 82 percent of its chip spending to computer products like desktops, notebooks and servers.
Thus, the supremacy of wireless as an OEM semiconductor spending category also is partly a consequence of Apple’s domination of hot mobile markets—and its primacy in the electronics supply chain.
Apple is set to increase its lead in semiconductor purchasing over HP in 2011 and 2012.