The semiconductor market is expected to improve in 2013, and first quarter results from leading mobile chipmakers support that forecast. Intel showed continued weakness, but chipmakers that primarily supply mobile device makers did very well.
Intel
The world’s largest chipmaker is working hard to break into mobile, but the company’s revenue and earnings are still driven primarily by the personal computer market. First quarter revenue was down 2.5% from the year-ago quarter to $12.6 billion, and net income was down 26% to $2 billion. Margins are under pressure as the company invests heavily in new products.
“Roughly half our spending now is on system-on-chip,” said Intel (INTC), noting that its “microprocessor world” includes phones, tablets and embedded chips for industrial and automotive customers. The company said in its first quarter earnings call that its tablet business is doubling every quarter.
Intel CEO Paul Otellini has announced his retirement. The company says it hopes to name his replacement at its May shareholders meeting.
ARM
ARM Holdings (ARMH) is only about one-fifth the size of Intel (based on revenue), but the company is clearly Intel’s top rival when it comes to chips for mobile devices. ARM had a blockbuster first quarter. Revenue was up 26% from the year-ago quarter to $263.9 million, and net income was up 58%. Since the British company licenses its chip designs to many U.S.-based manufacturers, the strong dollar helped boost results.
Like Intel, ARM is losing its CEO. The company said several weeks ago that its CEO Warren East will retire in July. His replacement will be Simon Segars, who is currently president of ARM.
Qualcomm
Qualcomm (QCOM), the leading maker of ARM-based chipsets for mobile devices, posted strong results for the first calendar quarter. Revenue was $6.12 billion, which was up 24% from the year-ago quarter. Net income (non-GAAP) was $2.07 billion, up 17% year-on-year. The company spent $1.1 billion on research and development (17% of revenue), up 28% from the year-ago quarter.
Broadcom
Broadcom (BRCM) beat Wall Street’s expectations with earnings of $400 million (non-GAAP) on revenue of $1.95 billion. Earnings were up 3% and revenue was up 10%. Research and development costs were 31% of revenue during the first quarter.
Broadcom is best known for its Wi-Fi and Bluetooth connectivity chipsets, but the company has recently launched NFC chips and LTE modem chipsets. Broadcom also makes turnkey solutions for Android device manufacturers, combining an HSPA+ processor, a graphics processor, a modem, an RF component, a power management chip, Wi-Fi and Bluetooth connectivity, GPS capability and an NFC chip.
The company still counts Apple as one of its biggest customers, so a slowdown in demand for iPhones and iPads could hurt the company. But Broadcom also does a lot of business with Samsung.
Samsung
Revenue from chip sales represented 16% of Samsung’s (005930.KS) first quarter revenue, and 60% of the company’s semiconductor revenue came from sales of memory chips. Samsung’s chip unit supplies its own handset business as well as outside customers. Recently demand for memory chips has been so strong that Samsung has reportedly turned to Korean rival SK Hynix for supplemental memory chips.
Samsung’s total chip revenue for the first three months of the year was $7.7 billion, making it a much larger chipmaker than any U.S. company except for Intel.
Freescale
Freescale (FSL) outperformed expectations for the second quarter in a row. The highly leveraged company continues to lose money, but revenue rose 3.2% to $981 million. Freescale does not make chipsets for mobile devices, but it does make small cell SoCs and chips for connected medical devices. The company’s most recent innovation is a chipset designed for use inside the human body.
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