Marking the largest quarterly increase in three years, the Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached US$74.7bn during Q2'13, an increase of 6% QoQ. Global sales for June 2013 reached US$24.9bn, an increase of 2.1% compared to June 2012 and 0.8% higher than May 2013.1
Regionally, sales in the Americas jumped 8.6% in Q2'13 compared to Q1’13 and 10.6% in June 2013 compared to June 2012. The global semiconductor industry has picked up pace through the first half of 2013, led largely by the Americas. There has been a consistent growth on a monthly, quarterly and year-to-year basis, and sales totals have exceeded the latest industry projection, with sales of memory products showing particular strength. Actual year-to-date sales through June are 1.5% higher than they were at the same point in 2012. Regionally, sales in June increased compared to May in the Americas (3.5%), Asia Pacific (0.4%) and Europe (0.1%), but declined slightly in Japan (-0.9%). Compared to the same month in 2012, sales in June increased substantially in the Americas (10.6%), moderately in Asia Pacific (5.4%) and slightly in Europe (0.8%), but dropped steeply in Japan (-20.8%), largely due to the devaluation of the Japanese yen.1
Benefiting from a small increase in inventory levels in the worldwide PC supply chain as customers began building inventory of Haswell-based PCs and higher platform volumes (partially offset by softness in Intel’s Mobile Communications business), Intel’s Q2'13 revenue of US$12.8bn was up 2% QoQ, but its net income declined by 2.2% due to higher start-up costs for next-generation 14nm process technology. Compared to Q2'12, revenue was down US$690mn, or 5%, as the PC Client Group platform unit volume decreased 5%.
Weak semiconductor market conditions, which continued into the first quarter of 2013, placed downward pressure on new equipment purchases. However, semiconductor equipment quarterly revenues began to improve in Q2'13, and positive movement in the book-to-bill ratio indicates that spending for equipment will likely pick up later in the year. Looking beyond 2013, it is expected that the current economic malaise will have worked its way through the industry and spending will begin to increase in all sectors throughout the rest of the forecast period.2
Worldwide semiconductor manufacturing equipment spending is projected to total US$35.8bn in 2013, a 5.5% decline from 2012 spending of US$37.8bn. Capital spending is also forecast to decrease by 3.5% in 2013 as major producers remain cautious in the face of market weakness.
Gartner predicts that 2014 semiconductor capital spending will increase 14.2%, followed by 10.1% growth in 2015. The next cyclical decline will be a mild drop of 3.5% in 2016, followed by a return to growth in 2017.2
Applied Materials generated orders of US$2bn, down 12% QoQ as a seasonal decline in foundry bookings was partially offset by growth in memory and logic orders along with higher bookings in the Display Group and Applied Global Services. Net sales were US$1.98bn, flat sequentially. The company recorded operating income of US$250mn and net income of US$168mn.
Texas Instruments’ Q2'13 revenue was US$3.1bn, up 5.6% from the prior quarter, and net income was US$660mn, up 82.3% from the prior quarter. Results include a gain associated with the transfer of wireless connectivity technology to “a customer” (as reported by TI but presumed to be Amazon.com given their work on Kindle) and higher-than-expected charges associated with previously announced restructuring. Excluding legacy wireless, revenue grew 8%. Industrial and automotive markets were significant contributors to the sequential growth in revenue.
Qualcomm’s revenues for the Q2'13 were US$6.2bn, up 2% from the prior quarter, but net income of US$1.6bn, was down 15.3% QoQ due to a sharp rise in cost of sales and R&D expense. The company shipped approximately 172mn Mobile Station Modem (MSM) integrated circuits for CDMA- and OFDMA-based wireless devices, an increase of 22%, compared to 141mn MSM integrated circuits last year. Total reported device sales were approximately US$56.5bn, an increase of 18% YoY. The sharp increase in R&D expenses in Q2'13 compared to last year was primarily attributable to increases of US$957mn in costs to develop CDMA based 3G, OFDMA-based 4G LTE and other technologies for integrated circuit and related software products, and to expand its intellectual property portfolio.
TSMC’s stronger than seasonal growth in Q2'13 was due to demand for their 28nm technology (contributing 29% of total wafer revenues for the quarter) and customers’ need to build inventory for the early launch of mobile products in the second half of 2013. Advanced technologies (40/45nm and below) accounted for 50% of total wafer revenues, up from 47% in Q1’13. Revenues from Fabless/System customers accounted for 87% of total wafer revenues in Q2'13. By application, Communication, Computer, Consumer and Industrial/Standard increased 22%, 18%, 9% and 11% QoQ, respectively.
Revenues for the subsector grew by 5.1%, with Texas Instruments and TSMC reporting the highest growth of 5.6% and 15.9% respectively. R&D for TSMC and Qualcomm increased QoQ by 10.5% and 6.9% respectively. Except for Intel and Qualcomm all the other semiconductor companies in our sample reported positive growth in net income.