According to Gartner reports – 2/9/2009 – Electronic News.

HP alone consumes more than 6% of semiconductor output in 2008, the research company said.

By Suzanne Deffree, Managing Editor, News — Electronic News, 2/9/2009

Powerhouse OEMs like Hewlett-Packard and Apple set a large part of the semiconductor industry’s tone, according to recent research from Gartner Inc.

The research house today reported that the top 10 OEMs accounted for $92 billion of the semiconductor market in 2008, representing a third of all semiconductor consumption. While that was a 3.8% decline from 2007, the leading applications remained PCs and mobile phones in 2008.

According to Gartner’s data, HP led the pack with $16.5 billion in 2008 semiconductor consumption, flat year over year. Apple’s consumption climbed 20% to place it at the number 7 position on semiconductor use in its computer and phone sales.

The top application areas remain data processing and communications electronics, which represented almost three-quarters of the semiconductors consumed by the top 10 OEM firms, Gartner reported. (See chart below.)

“The scale of the top 10 branded electronics firms’ semiconductor consumption really shows how important they are to setting some of the major direction for the semiconductor industry,” Alfonso Velosa, a research director at Gartner, wrote in the company’s Semiconductor DQ Monday Report issued this morning.

Velosa noted that the semiconductor consumption for these companies is bigger than most companies’ total business and that the cutoff to be in Gartner’s top 10 for 2008 was $6 billion.

“Changes in tactics or strategy these firms make have implications with wide repercussions in the semiconductor industry, especially because the semiconductor firms tend to have very high fixed costs if they have fabrication facilities,” he said.

Velosa illustrated his point with memory semiconductors sales. HP, the top PC OEM, is the major customer for DRAM, and Apple is one of the top two purchasers of NAND flash memory. “Beyond competitive dynamics, changes in these OEM firms’ business or contractual average selling price are a fundamental element for the major memory firms’ product and business strategies and have a major influence on their gross margins,” he said.

Indeed, Apple’s weight in the flash market is well known. Reports that the consumer-electronics maker had significantly slashed its 2008 NAND-flash orders encouraged iSuppli Corp to lower its total NAND-market estimates last year.

“In addition, given the scale of these branded electronic firms, their purchase patterns also indicate when key semiconductor technologies are starting to become adopted by mass markets and how they need to be integrated into the overall electronics supply chain to be viable,” Velosa said.

Again looking to Apple, Velosa credited the company as having demonstrated the viability of designs that integrate sensors, MPUs, and connectivity. “More importantly, it has integrated these semiconductors with operating software and a ‘user experience’ mentality that has resonated with consumers,” he said.

“Therefore, successful semiconductor firms have invested — and will continue to need to invest— in several areas: expertise in software; a focus on ease of use and the overall user experience; relationships with major content developers; and an understanding of the overall electronics ecosystem,” Velosa concluded.

2008 semiconductor consumption of top 10 OEMs by application category