U.S. Firms Lose Market Share of Semiconductors : Technology: American computer chip industry gives up ground to overseas rivals for first time in three years.
The American computer chip industry grew rapidly in 1994, but not rapidly enough to prevent U.S. firms from losing ground to overseas competitors for the first time in three years, according to data released Monday by Dataquest, a San Jose market researcher.
The reversal underscores the continued strength of the Japanese semiconductor industry and the rise of powerful new players in East Asia.
While American chip makers boosted sales an impressive 22% last year, showing a continued healthy recovery from its depressed state in the late 1980s, Japanese companies rebounded from their slump with a 28% increase in sales.
Other Asian countries showed an astounding 63% jump in revenue, taking two percentage points in market share away from the United States and putting America back into a neck-to-neck race with Japan for world leadership.
The big winners were South Korean companies that invested aggressively in recent years. Both Goldstar and Hyundai nearly doubled their sales last year, while Samsung’s chip sales jumped 61% to $4.9 billion. Samsung on Monday said it would invest $1 billion to build a plant in the United States.
With total sales reaching $109 billion last year and expected to grow 14% a year through the end of the decade, the semiconductor industry is recognized as a strategic sector. The industry is also critical because it provides the essential ingredients for high-growth businesses such as personal computers and cellular phones.
Asia’s chip growth was driven by a 60% increase in demand for so-called DRAMs, memory chips which are used extensively in personal computers and in which South Korean and Japanese companies have invested heavily. Texas Instruments and Micron Technologies are the only remaining U.S. suppliers of DRAMs.
Gary Grandbois, principal analyst at Dataquest, says the rapid growth in DRAM sales was the result of a chip shortage that pushed prices up. “It’s an unusual situation in the semiconductor business to see prices rising,” Grandbois said.
The shortage was the result of sharply lower Japanese semiconductor investments since the Japanese economy went into recession in 1991, combined with strong demand from the personal computer boom in the United States. The shortage is expected to ease toward the end of this year as new production comes on line.
While U.S. companies’ sales growth has been more modest than that of their Asian counterparts, the firms may have better long-term prospects for earnings growth because they dominate the most profitable segments of the business such as microprocessors, the brains of computers.
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In the Chips
The semiconductor market broke the $100-billion mark in 1994, reaching $109.7 billion in revenue for the year. Preliminary 1994 worldwide semiconductor revenues, in billions of dollars:
1993-94 1994 1993 1994 revenue market Region revenue revenue growth share North American $37.1 $45.4 22% 41.4% Japanese 34.6 44.4 28 40.5 Asia-Pacific 6.2 10.1 63 9.2 European 7.7 9.8 27 8.9 Total revenue 85.5 109.7 28 100.0
Source: Dataquest
