El Segundo (CA) - The world's largest semiconductor company saw its chip revenues dropping dramatically in the second quarter of this year. Isuppli estimates that the firm's sales pulled back by almost 13%, resulting in a market share off 11.4% - the lowest level since Isuppli began tracking semiconductor sales in 2002.
Tuesday wasn't a particularly good day for Intel. First, the company announced that it will slash about 10,500 jobs within the next three quarters in an effort to streamline its operations and increase profitability. And then there was Isuppli's Q2 semiconductor report provided more detail on Intel's chip sales.
According to the Intel's second quarter earnings report, sales were down 13% year-over-year and profits decreased 57% over the same time frame. Isuppli's market estimates reflect the quarter result and indicate that Intel lost 1.8 percentage points in semiconductor market share between the first and second quarter of this year alone. The firm's chip sales declined from about $8.14 billion in Q1 to $7.1 billion in Q2. The overall chip market, however, experienced a slight increase in sales from $61.5 billion to $62.3 billion. As a result, Intel's market share dropped from 13.2% in Q1 to 11.4% in Q2.
With the exception of NEC, ranked 10th in Isuppli's listing, every other chip company in Isuppli's top-20 was able to increase its sales during the quarter. Samsung inched up 1.5% to $4.5 billion; Texas Instruments gained 5.2% to $3.2 billion and ST Microelectronics 5.6% to $2.5 billion. Toshiba rounds out the top-5 with 0.5% gain to $2.3 billion.
According to Dale Ford, vice president of market intelligence services at Isuppli, Intel's revenue drop was especially highlighted by the firm's performance last year. "It looks much more dramatic than it really is. The result is magnified by Intel's huge revenue increases last year," Ford told TG Daily. However, he still considered the revenue drop as "unusually" high: "Intel is at its lowest market share in more than four years," he said.
Matthew Wilkins, an analyst at Isuppli, believes that a combination of aggressive pricing and customers waiting for the new Core 2 Duo processor generation may have led to lower revenues for Intel. "To a certain event, consumers and corporate customers knew that the Core 2 Duos would be much faster chips and that Intel would be offering them at aggressive prices," he said. "People were waiting to buy new computers." The aggressive pricing also applies to the outgoing processors Pentium 4, Pentium D 800 and 900. With customers waiting for the Core 2 Duo, some system builders reported a drop in demand for these processors causing lower shipments on the once side and lower revenues as a result of sharp price reductions by Intel. "Pentium D processors have become available in a pricing envelope where you typically see value chips such as the Celeron processor," Wilkins said.