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Chip Industry Will End 2011 Growing Less than 1 Percent

The global semiconductor industry will end 2011 growing less than 1 percent, as some semiconductor manufacturers posted modest sales gains, while others suffered single-digit revenue declines, according to researcher Gartner, Inc.

Worldwide semiconductor revenue grew 0.9 percent from 2010 as it reached $302 billion in 2011, Gartner reported. After a strong first half, concerns about the strength of the macro economy slowed equipment and semiconductor orders in the second half.

Many chip suppliers did well in the early part of the year and in many cases entered the year with a backlog from 2010, according to Stephan Ohr, semiconductor research director at Gartner. "But uncertainty about the state of the macro economy set in at the midpoint of the year. Consumers held off purchases, and infrastructure expansion plans languished as governments resisted assuming more debt,” he said. As a result, equipment inventories began to build, which had a ripple effect throughout the semiconductor industry.

Some semiconductor suppliers did not seem to be affected by worries about the macro economy. Intel, the world's largest chip maker, boosted its sales 21.6 percent and now holds 16.9 percent of the global semiconductor market. This is the highest market share Intel has ever had, with 2011 sales forecast to total $51 billion, Gartner estimates.

Intel posted robust first-half growth as PC OEMs stocked up inventory in anticipation of a strong second half of the year. Intel had a string of demand for its Westmere and Nahelem processors, which are used in servers, Gartner reported. Intel's revenue for 2011 includes the wireless business unit it purchased from Infineon. The transaction was worth about $1.4 billion to Intel's revenue in 2011.

Qualcomm had a 36.3 percent revenue increase, as its sales rose from $7.2 billion in 2010 to $9.8 billion in 2011.

Samsung Electronics, the number two global chipmaker, posted 3.7 percent revenue growth despite falling prices in the DRAM market. Samsung is the world's largest DRAM manufacturer.

Samsung had strong growth in its NAND memory business. However, Samsung's non-memory business was the strongest growth area for the company. That business includes wireless applications processors. Samsung supplies Apple with the 85 processor used in iPhone 4s and the iPad2.

Texas Instruments, the third largest semiconductor company, grew its sales 1.7 percent, according to Gartner. TI has very strong manufacturing capability in the analog chip industry. However, uncertainties in the macroeconomic environment affected revenue for all analog suppliers as orders slowed in the third quarter of 2011 and again in the fourth.