In a balancing global economy, it’s a common phenomenon that at certain times a few sectors or segments within the sectors grow much faster compared to others. And a few companies within the growing sectors lead those sectors. Both the growing sectors and the leading companies in those sectors become the centers of attraction. In such a scenario, we tend to overlook the real picture and look at only the largest growth numbers of those centers of attraction.
Similar is the situation with semiconductor IDMs and fabless companies. Since the start of fabless model of semiconductor design, it has seen continuous high growth rate that outpaced the growth rate in IDMs in terms of percentage points. However, it’s important to note the base figures as well. Higher is the base, more difficult it is to attain a higher percentage growth number. Lower is the base, easier it is to attain a higher percentage growth; of course the company has to do well. Okay these are general perceptions; let’s look at the actual numbers.
Reviewing this IC Insights report, one can clearly see continuous high growth in fabless companies compared to IDMs. In 2010, only once, IDM semiconductor sales growth outpaced fabless semiconductor company sales growth by 6% (encircled in the chart above). According to IC Insights forecast, 2015 will be the second time when, I must say it differently; fabless company sales growth will be lower than IDM semiconductor sales growth. The reason of this twist this time is that the fabless sales growth will go into negative, while IDM semiconductor sales will remain flat. Let’s review the numbers of top10 (post-merger) IDM semiconductor sales as well as fabless semiconductor sales. Also ponder over the base sales figures in both cases.
The reason of 5% negative growth in fabless semiconductor sales in 2015 is due to 20% decline in Qualcomm/CSR’s sales. It’s obvious because Qualcomm lost Samsung application processor business as the Samsung started using its own Exynos processors in its smartphones. An interesting point to note in the fabless semiconductor table is that both the China players, HiSilicon and Spreadtrum are about to register very handsome growth in sales. Apple/TSMC sale is the application processor sales to Apple from TSMC.
It’s expected that going forward the fabless semiconductor sales will continue their high percentage growth. So, is there any possibility of their absolute sales going higher than IDM semiconductor sales anytime in future? I don’t think so.
See the absolute total sales of top10 IDMs and fabless companies in 2015; the IDM semiconductor sales are at $175+ billions compared to fabless semiconductor sales at $60+ billions. The IDM semiconductor sales are ~2.9 times higher than that of fabless semiconductor. The base sale of top IDM company, Intel is more than 3 times the base sale of top fabless company, Qualcomm/CSR. Only top3 fabless company sales are above the lowest ranked Sony’s sale among the top10 IDM companies. Sony is making great progress in O-S-D segment, an almost exclusive segment for IDMs. Among fabless companies, only Avago/Broadcom has some presence in O-S-D segment.
Any guesses on how and when fabless semiconductor sales can catch up with IDM semiconductor sales, if at all it can? We should also consider the possibilities of IDMs acquiring fabless companies where it makes sense for them to fuel innovative designs.
The IC Insights report can be found HERE for your reference.
Pawan Kumar Fangaria
Founder & President at www.fangarias.com