Diminishing semiconductor content ??
According to a recent research in Semiconductor DQ report from Gartner, it is noted that the top 100 OEMs consumed semiconductors worth $209 billion in 2007 or a total 76% of semiconductors sold last year. However their semiconductor consumption did not grow as fast as their revenues. The report highlights 2 ongoing issues faced by the semiconductor industry - significant erosion of semiconductor content and average selling prices (ASPs),
While ASP’s have long been an issue especially in the computer and cell phone market, the other aspect of decreasing semiconductor content is a worrying trend for the semicon industry. True, we are seeing some signs of new and innovative uses of semiconductors, such as sensors being implemented in products by firms such as Nintendo & interesting new touchscreen-based products, but then that by itself may not be enough.
Reverse trends include:
- Talks of Apple selling newer versions of its iPhone s/w through its iTunes stores. Unlike traditional mobile handsets, where users change their handsets quite frequently (hence more semicon content demand), iPhone users may not change their handsets so often and upgrade their phones mostly through relevant s/w upgrades.
- Recently there was this interesting news article in Biz section of International Herald Tribune (dt. June 23 ’08). It reports that Nokia wants to transform itself into the next generation entertainment company. It has already created (last August) an Internet service and online music store, Ovi, said to compete directly against Apple.
Nokia predicts that in the next 5 years, phone users will create 25% of entertainment watched on smartphones. – and that Nokia will share that entertainment.
Both these examples indicate a growing dominance of s/w content and potentially diminishing h/w demand in the computing and consumer industry – areas which already show a pricing weakness (Gartner made note that the semiconductor content pricing in these areas decreased almost 9% in 2007 compared with 2006).
How does this bode for the semicon industry???