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Are there {complink 379|Apple Inc.} turfs that {complink 4751|Samsung Electronics Co. Ltd.} doesn't want to stomp on? The Korean electronics giant in 2012 grabbed the title of the No. 1 consumer of semiconductors from its North American smartphone and tablet PC competitor, according to an announcement yesterday by Gartner Inc., adding to its bragging rights as the world's biggest seller of smartphones.
Gartner said Samsung was the world's biggest “semiconductor customer” in 2012 with a 28.9 percent jump in its chip demand to $23.9 billion compared with $18.6 billion in the preceding year. During the same period, Apple slid to the No. 2 position with a still respectable 13.6 percent jump in semiconductor usage to $21.4 billion from $18.8 billion in the prior 12-month period. The other companies making up the top five positions are HP at No. 3, Dell at No. 4, and Sony at No. 5. Lenovo, Toshiba, LG Electronics, Cisco, and Nokia were also on the top 10 list of semiconductor users in 2012, according to Gartner.
Samsung's rise to the top position as the world's biggest buyer of semiconductors was not a surprise. It posted strong smartphone sales in 2012, helping it eclipse Apple as the world's leading seller of the device. Additionally, it continues to ship traditional phones at a healthy clip and while it has been less successful in the tablet PC segment, it has also seen its market share there rise strongly. Based on current projections, the company is likely to widen the gap between it and other OEMs this year and over the next several years.
The PC market was still the top destination for semiconductors in 2012 and that may not change this year, according to Gartner. One reason for this is that the amount of semiconductors used in smartphones and tablet PCs is typically lower than for regular PCs. Partly as a result, total semiconductor shipment fell in 2012 to $297.6 billion, a 3 percent decline from $306.8 billion in 2011, the research firm said.
Masatsune Yamaji, principal analyst at Gartner, indicated in the above statement:
In addition to a weak macroeconomic situation, a dramatic change in consumer demand contributed to a reduction in semiconductor demand in 2012. The PC market still represented the largest sector for chip demand, but desktop and mobile PCs did not sell well, as consumers' interest shifted to new mobile computing devices like smartphones and media tablets. This shift caused a substantial decrease in semiconductor demand in 2012, as the semiconductor content of a smartphone or a media tablet is far less than that of a PC.
Yamaji said other segments of the electronic equipment market stepped in with higher semiconductor consumption in 2012, led by the datacenter and communications infrastructure sectors. Even so, the companies that many leading chip vendors will focus upon more in the future for sales would continue to be Apple and Samsung, which together now account for more than 15 percent of total industry semiconductor usage.
Apple doesn't own its own semiconductor operation but Samsung does, which meant that in 2012, it purchased some or even the largest chunk of its chip requirements from itself. Samsung was also a supplier to Apple, which is trying to cut down on chip purchases from the Korean company as their rivalry intensifies. For now, though, Samsung seems to be hitting all the sweet spots in the market.
Yes, Samsung looks good follower. But what people look for admiration is leader creating new marks of iinovation and wonderful awe inspiring products. Again look at all Apple products. Look iMac, Apple keyboard, mouse, tocuh pad etc. What do you think?
Samsung is high ip on the innovation ladder too.
Samsung has come a long way to get both trust and respect of conusmers that Nokia has sometime ago. Apple has for sure high innovation quotient in their products but Samsung is closing the gap quite fast. Apple bought IP licencense from Samsung for some of the innovative product so one thing is sure that Apple should be looking over its shoulders for ideas.
Samsung really took time to come this far and worth watching out for this year for a more stable consumer electronics
I think samsung is not doing badly when it comes to innovation and state of art electronics. If Samsung will not relent, it will be a strong competitor for Apple and may eventually start to lead soon
Yes, Samsung is a good follower but it's also one that has become a leader. It is No. 1 in smartphones and mobile phones, No. 1 in DRAM (memory semiconductor) and a leader in TVs plus other consumer electronics products. The company couldn't have achieved these positions only by being a follower. It is an innovator too.
_hm, Remember Samsung is a major supplier to Apple too!
@_hm, the company have done pretty well to have come this far. It's currently the market leader in smartphones, where they have hit a 76% record high in just the sales of smartphones alone. The company owns manufacturing facilities, where their products are built. Apple may have the capability to design its own devices and some other software it uses, but rely on Samsung and some other electronic technological companies to build its devices. I think Samsung's achievement cannot be regarded lightly. This is a company turning things around and certainly still going strong.
I agree Pocharle. Samsung is certainly a market leader in innovation. Samsung's latest version of its Galaxy S range is regarded comparable in design and other features too.
Absolutely Himanshugupta! I think Apple is certainly looking over its shoulder. You're correct Samsung is closing the gap fast!
@Kayode, Samsung snatched the market leadership crown from Apple in Smartphones sales – that is no joke. It shows how hard the company is hacking away at Apple. It launched its attack, where Apple is most vulnerable – that is the smartphones market and used it to their advantage .More so; it's been able to deliver smartphones of various shapes and sizes with features to match that of iPhones. I'm sure Samsung cannot let down its guard at this moment. I hope not.
I recently read that the number of Android devices in the world will surpass the number of devices on iOS platform. That's another worry for Apple as it now has much stronger competition on the software side as well while competing on the hardware side with Samsung and others.
“ The company couldn't have achieved these positions only by being a follower. It is an innovator too.”
@Bolaji: I agree. Most people think innovation is all about new products which is not necessarily the case. Innovation can also be in terms of producing the existing products at a cheaper cost which is primarily what Samsung has done. Yes, it wasn't the first one to come up with touch-based devices but it was able to product touch-based smartphones and tablets at lower costs through innovation which is why they became a success.
They definitely outdid Apple. Let's see if they can keep the steam rolling.
Anna,
The report highlighted extremely worrying trends(as you rightly point out).
It very clearly showed that The Fortunes of The Personal Computer Industry and that of the Semiconductor Industry continue to be tied together(For Better or worse).
Which is to be expected-A PC needs way more components than a Smartphone.
One hope for the industry could be that the Smartphone Replacement cycle amongst Global Consumers is much-much faster than that of PCs.
Even here,News from T-Mobile in the US[Removal of all Phone subsidies on Cellphone Plans];means there is now more Pressure on Smartphone Manufacturers like Apple/Samsung/Nokia/Google/Microsoft/LG to dip into their cash horde to provide subsidies to consumers to purchase their handsets.
Will they bite the bullet?
I am not so sure.
The report had other worrying indicators HERE-
The uncomfortably high level of inventory among semiconductor manufacturers of nearly all stripes is a result of key demand drivers failing to materialize. Demand for semiconductor devices has typically come from new products that consumers feel compelled to purchase. But going into the holiday season last year, no such new products marshaled enough impetus to overcome consumer fears about lingering economic woes. Two months prior to Christmas, consumer purchases of electronics had grown by only 0.7 percent, the worst performance since 2008.
Worst Performance since 2008-Wow! That's really bad!!!
Guys,
This just in From Japan;
In November Japanese Exports to China of Semiconductors were down by 17% YoY!!!
In November Total Japanese Exports were down 14.5%; in December, 15.8% to ¥906 billion. Worst hit were cars, trucks, and parts (-47.5%), machinery (-22.2%), and electrical machinery, which includes tech products like semiconductors (-16.8%). Imports from China edged down by 2.1% to ¥1.24 trillion. And the trade deficit jumped by 76.8%.
Numbers coming in on Japan's Exports to the Eurozone are terrible too.
More HERE
http://www.testosteronepit.com/home/2013/1/24/what-the-japanese-trade-deficit-says-about-the-fraying-fabri.html
If the Numbers are bad for China and Europe[Two of The World's Biggest Economies];How can they be Good for the Rest of the World???
Ashish, Were you really surprised Japanese semiconductor and auto sales to China fell? What happened last year between the two countries and ongoing is bad for their trading relations.
Bolaji,
If this was just Data for Japanese Exports to China,then I would have said it was everything to do with their Fight.
But then how do you explain that Exports to Europe are also sharply Down as well?
Clearly there is another Dynamic at play here.
Consumer Demand for Electronics has tapered off for now.
The way I look at the whole issue is like this-
The World has 3 Demand Engines-The US,Europe and China.
With Two slowing Down,Its tough for America (which has its own issues) to pick up the slack.
And then we have the French (who live in their own world)-
France's Labour Minister announces Publically that France is Totally Bankrupt!!!
Not exactly the perfect recipe for Growth (or reduction of Semiconductor inventories) is this?
http://www.telegraph.co.uk/finance/financialcrisis/9832845/France-totally-bankrupt-says-labour-minister-Michel-Sapin.html
Regards
Ashish.
Guys,
The Japanese Yen has lost an incredible 27% of its Value vs the Euro,A not so insignificant 19% of its value vs the US Dollar and a Whopping 21% vs the British Pound since 1st January 2012;Inspite of this amazing Boost to Japanese Exports;Japan's Exports still fell.
What Gives?
We are staring at a massive Slowdown if ever there was one.
If this is'nt a clear indication of how difficult a Phase our Economy is passing through I don't know what is.
Ashish, Okay. I hear you loud and clear but please extend the analysis to the rest of the global economy. The numbers you've referenced are all Japanese. What's going on elsewhere? Does your crystal ball point to humdrum growth elsewhere?
Bolaji,
That's the thing;If you trust Chinese Data(which I don't);then China is strolling along at Growth Rates of more than 8%;which I don't believe one bit.
China is most definitely not growing at more than 4% today(irrespective of what the Communist party tells you).
The US is muddling along at a Growth rate of 1% or so;While Europe is definitely contracting.
That leaves Central and South America,Africa,Rest of Asia(excluding Japan and China).
That's a Huge Number of people there(More than 3 Billion) many of whom have the same Needs and Desires as the Three Big Demand Centres;but they have a much lower purchasing Power than the Three Big Demand Centres.
If the Semiconductor Industry focusses on their Needs more(for Low cost electronic Products-similar to what India is doing with the Aakash 2 and Aakash 3 tablets);then there is hope for the semiconductor Industry.
But this kind of a transistion will need a lot of effort from the Industry as a whole (and will send Shivers down Apple's Spine)-No wonder the Stock is sinking rapidly today.
Regards
Ashish.
Spot on. The demand environment is definitely not optimal. So, why do we have analysts still projecting low to upper single digit growth for the semiconductor industry?
Bolaji,
Before I say anything Analysts;I highly recommend you read these Analyst recommendations for where Apple's stock was supposed to be (according to the Biggest and Greatest Analysts).
Given that most of these recommendations were made sometime around September-October 2012(& then revised in most cases Upwards);even a Child can tell you that most Analysts are nothing but Trend-Followers.
90% of All So-called Analysts can't think outside the Box.
See how few Analysts are even close to today's Apple Stock price(only Two).
And how has Apple done since it Topped out in September 2012?Its lost an amazing 35%!!!
Still the fools stick to their Targets!!!
Now I hope you know why most Analysts are clueless and not worth following at all.
I reckon the recent market boom is a sign of desperation where people are struggling to know what to do with cash. I don't believe the fundamentals have changed that much. Increased inventory is a bad sign.
When comparing mobile and PC semiconductors, are it the same and quantities the only thing that changes?