iPod sparks record boom in chip sales

Sales of semiconductors break a 'historic' barrier, to use Gartner's words, as they hit $235bn in sales helped by iPod nano

Sales of semiconductors are at their highest ever level, said Gartner on Friday, as they broke a five-year-old record to reach $235bn. The last time they approached this level was when worldwide revenue hit $223bn in 2000.

The total revenue of $235bn represents a 6.9 percent increase from 2004 said Gartner, stressing that its figures were based on preliminary results.

The healthy outlook was attributable to "strong growth in the NAND flash market", according to Andrew Norwood, research vice-president at Gartner. "The continuing strong demand for flash card and USB flash drives in 2005, along with the successful launch of the iPod shuffle by Apple at the start of 2005 and the release later in the year of the iPod nano, will drive this device market to the highest revenue performance in 2005."

Intel had one of its best years in 2005 said Gartner as its revenue grew 14.3 percent, or twice the market average. The analysts pointed out that in the previous three years, Intel's growth rate had been below the market average. Intel's core microprocessor business performed in line with the overall company, with revenue from the desk-based processor market showing positive growth, while mobile-based components experienced much stronger revenue growth driven by increasing shipments of mobile PCs, the analysts said.

Intel accounted for $35bn in revenue, giving it twice the share of its nearest competitor Samsung, which also had a good year. According to Gartner, Samsung now dominates most areas of the memory market, holding the number one position in DRAM, SRAM and the fast-growing NAND flash market.

Hynix Semiconductor moved into the top 10 for the first time in 2005 thanks to the NAND flash segment. Hynix's revenue is likely to reach $1.5bn, up from $212m in 2004, an increase of more than 600 percent, Gartner said.

"This success is made more satisfying for Hynix given the financial struggles the company has endured over the last few years," Norwood commented.

One vendor missing from the top 10 this year is Philips Semiconductor, which held the number nine position in 2004. "The Dutch company was pushed out of the top 10 for only the fifth time in the last 25 years," said Norwood.

But while market share results provide a good indication of which vendors did well or poorly during a year, "it does not tell the whole story" Gartner warned. "Often, the performance of a vendor is based on the results of the overall segment growth of the device area that the vendor participates in."

According to Norwood, in future the industry needs to be careful with its figures as the iPod nano shows that it is more "tied to consumer spending habits".

"The loss of market share in an end application, such as mobile phones, by a vendor customer can have a dramatic effect on the semiconductor vendor's business."

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