Market analysis

The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached US$78.4bn during Q1'14, marking the industry’s highest-ever first quarter sales. Global sales reached US$26.16bn for the month of March 2014, an increase of 11.4% from March 2013 when sales were US$23.48bn and a slight uptick of 0.4% compared to last month’s total of US$26.04bn. Regionally, sales in the Americas increased by 16.1% YoY.

The global semiconductor market has demonstrated consistent momentum in recent months, and sales are well ahead of last year’s pace through the first quarter of 2014. Regionally, YoY sales increased in the Americas (16.1%), Asia Pacific (12.9%), Europe (8%) and Japan (0.4%), marking the first time in more than three years that YoY sales increased across all regions. Sales were up compared to the previous month in Europe (3.9%), Asia Pacific (1.4%) and Japan (0.3%), but down slightly in the Americas (-4.3%). Memory, and in particular DRAM, led this growth; not due to strong demand, but rather weak supply growth that pushed pricing higher. In fact, the overall market faced a number of demand headwinds during the year, with PC production declining 9.9% and the premium smartphone market showing signs of saturation as growth tilted toward lower-priced, entry-level and mid-range smartphone models.1

Worldwide semiconductor capital equipment spending is projected to total US$37.5bn in 2014, an increase of 12.2% from 2013 spending of US$33.5bn. Capital spending will increase 5.5% in 2014 as the industry begins to recover from the recent economic downturn. Total capital spending will grow by 5.5%, while wafer fabrication equipment will increase 13% as manufacturers pull back on new fab construction and concentrate in ramping new capacity instead. Momentum from exceptionally strong Q4’13 sales has carried forward into the Q1'14, but is expected to marginally slow.2

This quarter Applied Materials generated orders of US$2.63bn, up 15% QoQ led by increases in Display and Silicon Systems. Net sales of US$2.35bn were up 7% sequentially. The Company recorded GAAP gross margin of 42.5%, operating income of US$387mn or 16.4% of net sales, and net income of US$262 million or $0.21 per diluted share. Applied gained 1.4 points of wafer fab equipment market share in 2013.

Qualcomm’s revenue of US$6.37bn was up 4% YoY and down 4% sequentially. Operating income of US$1.99bn was up 6% YoY and 33% sequentially and net income was US$1.96bn, up 5% YoY and 4% sequentially. The company returned capital to stockholders, a total of US$1.59bn, including US$1.00bn through repurchases of 13.4mn shares of common stock and US$589mn through cash dividends.

Texas Instruments reported Q1'14 revenue of US$2.98bn, net income of US$487mn and earnings per share of 44 cents. Net income jumped by 34.5% YoY due to an inclusion of a gain of US$37mn, which was not included in the company's prior outlook and it increased earnings by 2 cents per share, related to property sale and other assets associated with restructuring actions. Analog and Embedded Processing comprised 84% of Q1'14 revenue. Gross margin of 53.9% remained strong and reflects the cost reductions in the Analog and Embedded Processing portfolio and manufacturing efficiency.

  1. SIA, May 2014
  2. Gartner, April 2014
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Raman Chitkara
Global leader
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