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The white box is mightier than the semiconductor

18 September 2008 | By Mark Osborne | Editor's Blog

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Semiconductor margins: iSuppliHow low can you go? That question has been asked by iSuppli Corp’s analysts after trawling over the financial figures coming out of semiconductor manufacturers (though not foundries).

Basically, the news isn’t that good. iSuppli noted that the quarterly profits produced are dwindling to the degree that PC manufacturers (known for low margins) now have better profit margins than semiconductor manufacturers.

“Semiconductor profitability has eroded steadily since mid 2004, with quarterly net profits having fallen into the single-digit range in 2008, down from the 17 percent to 19 percent range in 2004,” said Derek Lidow, president and chief executive officer of iSuppli. “The semiconductor industry now is less profitable as a percentage of revenue than the notoriously low-margin PC business, something that hasn't occurred before, except during a short period of the severe market downturn in 2001.”

Lidow recommended that survival tactics either revolve around better customer collaboration using skills and IP to offer unique offerings, or go for acquisitions that bulk-up businesses and leverage scale.

No surprises then when Lidow, suggested outsourcing of manufacturing as a clear option for those wanting to remain at the top of the food chain.

Uncertain where you sit in the world of semiconductors and what to do now that white box makers are doing better than you, then I am sure iSuppli will be happy to help!

Quarterly margins

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