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iPhone 5: Boost to semiconductor market?

iPhone 5: Boost to semiconductor market?
by Bill Jewell on 09-25-2012 at 11:03 pm

 The release of Apple’s iPhone 5 has led to much speculation on its impact on the economy. An analyst at J.P. Morgan estimated the iPhone 5 could add $3.2 billion to U.S. GDP in the fourth quarter, adding ¼ to ½ point to the GDP growth rate.

Analysts’ estimates for total iPhone sales in 4Q 2012 are in the range of 46 million to 50 million units. iSuppli estimates the semiconductor content of the iPhone 5 at $154 for the 16G model, $165 for the 32G, and $175 for the 64G.

In the fourth quarter of 2011 when the iPhone 4s was released, 89% of iPhone sales were the 4s, according to Consumer Intelligence Research Partners. Assuming 90% of iPhone sales in 4Q 2012 are 5’s and total iPhone sales of 48 million units results in 43 million iPhone 5’s. Assuming $165 average semiconductor content, the 43 million iPhone 5’s would generate $7.1 billion in semiconductor sales in 4Q 2012.

Our latest forecast at Semiconductor Intelligence for the year 2012 semiconductor market was $297 billion, a 1% decline from 2011. Adding $7.1 billion from iPhone 5 semiconductors would result in a $301 billion semiconductor market in 2012, a 1.4% increase from 2011.

However these numbers are not realistic. The underlying assumption in the above estimates is that people who buy iPhone 5’s in 4Q 2012 would not have bought any other mobile phone in 4Q 2012. It also assumes the money people spend on iPhone 5’s does not displace money they might have spent on other electronics purchases. The table below shows IDC estimates of total mobile phone sales and smart phone sales. iPhone sales numbers are from Apple and other smart phone sales are calculated. The last two columns show the change in millions of units for smart phone sales compared to the prior quarter. The forecasts for 3Q 2012 and 4Q 2012 mobile phone sales are from Semiconductor Intelligence (SI) and other analysts.

Over the last three years, sales of iPhones have declined in either the quarter before or the quarter of a new iPhone release. Many buyers delayed purchasing iPhones until the new model was released. After the release of the new model, iPhone sales grew strongly. However sales of other smartphones showed similar or stronger growth.

iPhone sales in 2Q12 were down 9 million units (inanticipation of the iPhone 5) while other smart phone sales were up 18 million units. Despite the surge in iPhone 5 sales in September, 3Q12 iPhone sales will be up only about 1 million units while other smart phone sales will be up about 15 million units. Semiconductor Intelligence believes 4Q12 other smart phone sales will be up 19 million units, close to the 21 million unit increase for mobile phones.

Semiconductor Intelligence forecasts total smart phone unit sales will be up 40% in 2012. However total mobile phone sales will be up only 2%. Thus the decline in non-smart phones almost offsets the increase in smartphones. Since the semiconductor content of smart phones is higher than non-smart phones, the semiconductor growth in total mobile phones should be higher than 2%.

We at Semiconductor Intelligence are making no adjustments to our 2012 semiconductor market forecast due to the iPhone 5. Strong iPhone shipment growth in 4Q12 is largely offset by weak iPhone shipments in 2Q12 and 3Q12. Strong sales of smart phones are at the expense of non-smart phones, resulting in weak total mobile phone growth. With the current weak economic environment, any boost in consumer spending on iPhone 5’s will likely be at the expense of other consumer electronics such as media tablets, notebook PCs and HDTVs.

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