Apple to Rise to No. 2 in Semiconductor Spending by 2011

Success of iPhone 4 and iPad will put company just behind No. 1 HP.

The phenomenal success of the iPad and iPhone is expected to make Apple Inc. the world’s second-largest semiconductor buyer in 2011, potentially positioning the company to become the world’s top chip purchaser in 2012, according to iSuppli Corp.

With projected semiconductor spending in 2011 of $16.2 billion, Apple will leap over Samsung Electronics Co. Ltd., which will drop to the third spot after finishing with $13.9 billion. Apple’s one-step rise in the rankings will move the company to a close second place behind Hewlett-Packard Co., which will retain its No. 1 ranking next year thanks to $17.1 billion in spending.

Leadership in semiconductor spending represents a position of prestige, and an advancement in the rankings means that a company has been successful in introducing new products and that it is allocating more dollars in research and development—two factors that, as it turns out, feed innovation as well.

In Apple’s case, the move to second place reflects the company’s triumph in the iPhone 4 and iPad, two flagship products that have captured the public’s imagination—and have garnered tremendous sales—on a scale unequaled by rival devices.

Apple’s expected rise to No. 2—eclipsing Samsung and putting it within a hair’s breadth of Hewlett-Packard— indicates that the company’s investment in its new smart phone and tablet has paid off—and will do so for some time to come, iSuppli believes.

Apple’s anticipated growth in 2011 continues the extraordinary arc of expansion enjoyed by the company in recent times. In 2009, Apple recorded a surprising 13 percent increase in semiconductor spending—a year when most manufacturers posted negative growth. This year, spending by Apple will rise by a staggering 54.0 percent to reach $12.4 billion—the highest growth rate predicted for any company. Next year, spending levels will be augmented by another 30.4 percent for the company to catapult to its vaunted second-place finish.

Barring any unforeseen mergers and acquisitions by current champion Hewlett-Packard, Apple could well snag the top spot as soon as 2012, ousting a company that has held the lead since early this millennium.

Other Fast-Growing Manufacturers Also Shine in Spotlight
For 2010, a number of OEM companies are set to join Apple and post rapid growth in semiconductor spending levels, iSuppli data show.

The next five companies following Apple, in descending order, are Lenovo Group Ltd., at 47.1 percent; SanDisk Corp., at 44.3 percent; Research in Motion Ltd.; at 42.9 percent; Cisco Systems Inc., at 37.3 percent; and Acer Inc., at 29.4 percent.

Overall, semiconductor consumption will continue to increase in the Asia-Pacific region, given the rise of manufacturing levels in the region and because of outsourcing activity flowing out from other areas. Major markets contributing to this trend include compute platforms, wireless communications and wired communications.