According to iSuppli, semiconductor revenue in 2010 is believed to have achieved record growth of 32.5% to $304 billion, courtesy of a boom in DRAM and NAND sales. NAND flash has received a major boost from demand from the smartphone and tablet markets. Another new trend that could drive up demand is laptops based on NAND flash memory. Apple’s MacBook Air is based on it and could lead the way for increased use of flash in laptops. Samsung and Toshiba/SanDisk are believed to be the Flash suppliers for the MacBook Air. Samsung and Toshiba are the leading suppliers of NAND Flash and are the main suppliers to Apple products like iPhone and iPad, while Micron is the third-largest supplier. Let’s take a closer look.
Another trend in the semiconductor industry this year was consolidation. Micron acquired Numonyx and Renesas acquired NEC, which had a significant impact on their growth and their position in the industry. Recently, STMicroelectronic acquired the semiconductor business of Arkados, which is involved in smart grid development and has an ARM-based powerline communications product called HomePlug.
STM (NYSE:STM) in its third quarter reported revenue of $2.66 billion, up 17%. Its annual revenue in 2009 was $8.5 billion. Net income was $198 million or $0.22 per share compared to a net income of $356 million in the prior quarter and a net loss of $201 million last year. STM expects fourth quarter revenue to grow 2% to 7% sequentially, and its results are due this month. It is trading around $10.44 with market cap of about $9.2 billion. It hit a 52-week low of $6.51 on August 31.
Micron Technology (NYSE:MU) reported first quarter revenue of $2.3 billion, up from $1.7 billion last year. Net income was $155 million or $0.15 per share compared to $204 million or $0.23 per share a year earlier. Analysts were expecting earnings of $0.29 per share on sales of $2.38 billion. Results included$200 million in payment from Samsung as part of a 10-year patent cross-licensing deal. Cash and equivalent balance at the end of the first quarter was $2.4 billion, and the company spent $635 million to repay debt in the quarter.
The global DRAM and NAND flash memory market segments achieved 80% and 40% growth in 2010, respectively, leading the industry boom. However, this growth is not translating into as much revenue growth for chipmakers because prices are declining. First quarter revenue from the Micron’s Memory segment, primarily comprising DRAM and NAND, decreased 12% compared to the fourth quarter. Sales of PCs, which use DRAM, have slumped in recent months due to the popularity of the iPad and other tablets. As a result, DRAM prices declined 23% sequentially and sales declined 19% sequentially. Micron sold more NAND in the quarter, but average NAND prices declined 15% sequentially.
Noel Randewich on Reuters further notes that NAND prices are declining due to improving technology and more production in anticipation of explosive demand from tablet and smartphone manufacturers. However, a recent outage at Toshiba could help to stabilize prices.
Micron this year acquired Numonyx, which provides the NOR Flash in the iPhone 4. NOR flash is a low-margin business, but the iPhone design win is a plus for Micron. Sales from Numonyx increased slightly in the first quarter compared to the previous quarter due to increases in selling prices offset by a slight decrease in unit sales volume.
In the second quarter, Micron expects DRAM prices to fall about 25% and prices for NAND to drop 10%. It expects second quarter revenue from Numonyx to decline sequentially to the low $500 million range. Micron expects Samsung to pay $40 million by January 31, 2011, and $35 million by March 31, 2011. Micron is trading around $8 with market cap of about $8 billion. It hit a 52-week low of $6.40 on August 27.
Another chipmaker, National Semiconductor (NYSE:NSM) with annual revenue of $1.42 billion, also missed estimates for its recent second quarter sales. National Semiconductor makes chips for cell phones and industrial and communications infrastructure equipment. Second quarter revenue was $390.4 million, down 5% due to lower demand from OEMs and distributors in all regions. Net income was $83.5 million or $0.34 per share, up from $47 million or $0.20 per share last year and down from $88.8 million or $0.36 per share last quarter. Analysts expected earnings of $0.32 per share on sales of $399 million. Gross margin decreased to 68.9% from 70.9% last quarter but was up from 65.3% last year. The company ended the quarter with an $879 million cash reserve.
NSM won its first integrated mixed-signal audio plus power management subsystem design for its headset for the China marketplace. Its RF power management products were incorporated in three new Qualcomm reference designs, two with mobile phone chipsets and one for the wireless LAN reference design.
For the third quarter, National Semiconductor expects revenues to be between $344 million and $359 million, or a decrease of 8% to 12%, compared to the first quarter of fiscal 2011. The stock is trading around $13.76 with market cap of about $3.3 billion. It hit a 52-week low of $11.84 on September 10.
2011 will probably be not as good as the year gone by for the semiconductor industry. iSuppli says that the DRAM and NAND growth factors will lose their steam in 2011, and the semiconductor industry is expected to grow around 5%. That pales in comparison to 32% growth in 2010.