Shift-West of Semicon Power Centers

It’s true that Japan was once the center of semiconductor business and we were carrying on with that perception until recently. In 1990, six out of top10 semiconductor companies (excluding pure-play foundries) were in Japan; and 59% of worldwide semiconductor market was concentrated with the top10 companies. The semiconductor business was east dominated. But that domination has faded away over time. The changing equations of semiconductor business have brought up newer players into business year-over-year and pushed the Japanese companies out of the top10 list. In 2014, only two Japanese companies were in the top10 list; and in 2015, only one of them would remain in that list. Let’s look at the table below from an IC Insights’ report.

In 1990, the top 3 ranks were occupied by the Japanese companies; NEC, Toshiba and Hitachi. The two well know US names in this industry, Intelwas at 4[SUP]th[/SUP] rank and Texas Instrumentswas at 8[SUP]th[/SUP] rank.

In 1995, Intel became number one and is maintaining that coveted position till date. Samsungtook a dramatic entry at number 6, rapidly improved its rank to number 2, and is maintaining that position just next to Intel. Motorola (now Freescale) has been there in top10 list until being out in 2014. Philips (now NXP) also has been on-and-off in top10 until being out in 2014. But now NXPand Freescale have merged together and the combined entity will show up in top10 list of 2015.

What is interesting to look at in this top10 list is continuous elimination of Japanese companies from 6 in 1990 to 4 in 1995, 3 until 2006, 2 in 2014, and now the only one remaining will be Toshiba in 2015.

The other dramatic entries in recent times are of fabless giants, Qualcommand Broadcom. The fabless companies significantly changed the semiconductor business model. The changed equation in 2015 shows 5 US companies, 2 European companies (NXP+Freescale is considered to be European), 2 South Korean and 1 Japanese companies in top10 list.

This is a significant shift in semiconductor business domination in western countries today. In 1990s, about 25 years ago, the direction was just opposite, Japan in Far East dominated in semiconductor business. Why the top10 list is important to consider is that these top10 companies have major portion of worldwide sales. In 1990, they contained 59% of total semiconductor sales, and in 2015 again they are expected to contain ~53% of total semiconductor sales. There were a few dips in the business during economic crisis. In 2000, they represented 49% and in 2006 it was the lowest of all at 45% of total worldwide semiconductor sales. This equation of lion’s share with top10 companies will continue because it needs large capital in the semiconductor industry to sustain the economy of scale needed to compete and remain at the leading edge in the semiconductor market place.

The fabless model has given rise to semiconductor IP industry that allows smaller companies to enter in the market with small capital requirements. However, they are ultimately serving the larger SoC players. And even in the IP market, ARM holds more than 35% of the total IP market share and if we combine the top5 IP companies, then the combined market share exceeds 70% of the total IP market share. Okay, IP business is much smaller compared to the total semiconductor IC market. However, it justifies how capital strong companies hold large part of the market share in the semiconductor business.

After looking at this top10 list, it raised my curiosity on how it would look if we include pure-play foundries also. So, I went back to look at one of my earlier blogs, “Look who is Leading the World Semiconductor Business”. There in the top20 list, I could find only TSMC as the pure-play foundry at number 3 among all other top 10 companies of 2014. So, let’s say, if we include foundries in the top10 list of 2015. Then the only change will be that TSMC will be in and ST will be out of the top10 list of 2015. Still, USA with 5 companies and Europe with 1 company will dominate the East.

Also read: US is the Ultimate Leader in Semiconductor Business

Pawan Kumar Fangaria
Founder & President at www.fangarias.com