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“Traditionally we’re a de-consolidating industry”, Rhines told the Forum.
Rhines pointed out that in 1972 the company with the most market share had the same market share as Intel has today.
“The combined market share of the top ten semiconductor companies has been flat for the last ten years, said Rhines.
The same is true for the top 50 companies, he said.
Even after the M&A shakedown last year the collective market share of the top ten companies is only 2.5% more than it was in 1984.
Why does the industry stay de-consolidated? Because, answered Rhines, because of industry transitions e.g from germanium transistors to bipolar silicon to MOS to microprocessors to SoCs.
Some companies didn’t see the transitions coming, some executed the transitions badly.
“All of transitions resulted in new entrants to the top ten,” said Rhines.
Why do people do M&A? asked Rhines.
It’s not for economies of scale, he pointed out. With a third of the industry’s product coming from foundries the cost of wafers is key.
“If you buy 50,000 wafers a month you get a 10% discount,” said Rhines, “if you buy 100 wafers a month you get no discount.”
So scale doesn’t give you much advantage in terms of wafer
Absolutely AnotherDave that’s the usual thing these days, no one likes to admit they don’t know something. So Wally is a shining exception as befits a man who, some say, should have got a Nobel Prize for early work on blue LEDs.
Well, anotherdave, sometimes it’s best (though rare) to say you don’t know when you don’t know
No way. People with high profile jobs aren’t allowed to not know stuff. It’s a fundamental principle of our society that someone who admits to not knowing something even tenuously associated with their professional life is expected to be formally charged with treason. That, as you well know, is why waffle was invented.
Well Mike Wally finished his presentation saying: “Maybe we’re in a period of immense change but maybe it’s just more of the same.”
Would that equate to, “I don’t really know what’s happening?” If this is the level of understanding it takes to be an industry expert, sign me up! I can begin spewing forth immediately, although the truly unfathomable gems might require a refreshing beverage or two to prise loose.
The problem is that the industry isn’t growing at a rate to support existing let alone new companies so M&A is now the only way to expand sales. Basically it’s now a mature industry.