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Market analysis

The Semiconductor industry had a pull-back in the third quarter, with companies under study posting a cumulative revenue decline of 4% year over year. Quarter over quarter, revenue was also flat. Net income also took a dip, falling 9% year over year, but growing marginally by 2.6% quarter over quarter. Qualcomm had the toughest quarter, seeing a 44% decline in net income year over year and a 10% decline sequentially.

Semiconductor revenue reached US$85.2 billion during the third quarter of 2015, a growth of 2% compared to the previous quarter, but 3% lower year over year. Global sales for the month of September 2015 were US$28.4 billion, 2% more than last month’s sales, but 3% lower than sales from September 2014. Overall semiconductor trends were clearly represented by the performance of the representative companies under study.

Global semiconductor sales gained some strength in September, increasing compared to the previous month across all regional markets for the first time in more than a year. However, lower demand and currency devaluation led to lower year-over-year sales numbers.

Regionally, in September, Americas’ sales grew by 4% compared to August, while China was up 3% and Europe saw an increase of 2%. For Japan and Asia Pacific/All Other the growth was relatively flat at 0.5% and 0.1%, respectively. Year-over-year sales increased in China (5%), but decreased in Asia Pacific/All Other (-4%), the Americas (-4%), Europe (-11%) and Japan (-11%).

In support of free and open markets, a major deal was struck in Geneva at the World Trade Organization to expand the Information Technology Agreement to eliminate tariffs on nextgeneration semiconductors termed MCOs and a wide range of other tech products.1

Worldwide silicon wafer area shipments decreased during the third quarter 2015 when compared to second quarter area shipments.2 Total silicon wafer area shipments were 2,591 million square inches in Q3’15, a 4% a decrease from the record amount of 2,702 million square inches shipped during the previous quarter. New quarterly total area shipments were flat when compared to third quarter 2014 shipments.2

Quarterly shipments for the most recent quarter are on par with the same quarter last year, with total silicon shipment volumes for 2015 through the end of the third quarter higher relative to the same period last year.2

In terms of company performance, Qualcomm revenues declined by 19% year over year and 7% quarter over quarter. Net income also dropped sharply by 44% year over year and 10% quarter over quarter. Qualcomm’s lower net income was due to a number of factors, including a US$975 million charge related to the resolution reached with the China National Development and Reform Commission (NDRC) regarding its investigation of violation of China’s Anti Monopoly Law in the second quarter of fiscal 2015. Progress striking new Chinese licensing deals has been slower than expected and a revenue mix shift towards chips with lower margin royalties also negatively impacted Q3’15 results.

Applied Materials reported fourth quarter orders of US$2.4 billion, down 16% sequentially and up 7% year over year. Net sales were US$2.4 billion, down 5% sequentially and up 5% year over year. Gross margins were 41% and net income was U$336 million, up 16% year over year, but up sequentially just 2%. The growth in net income was due to considerably lower provision for income tax this quarter compared to Q3 2014.


1., Nov 2015

2., Nov 2015