Worldwide semiconductor revenue will total $235 billion (R1.8 trillion) this year - a 6.9% increase from 2004, according to preliminary results from Gartner.
This surpasses the previous record year of 2000, when semiconductor revenue reached $232 billion, the international research firm says.
"Strong growth in the NAND flash market was a recurring theme in the 2005 market share rankings. The continuing strong demand for flash card and USB flash drives in 2005, along with the successful launch of the iPod shuffle by Apple at the start of 2005 and the release later in the year of the iPod Nano, will drive this device market to the highest revenue performance in 2005," says Andrew Norwood, Gartner research VP.
While the industry has reached new levels in revenue, Gartner says major risks still exist for vendors.
"Semiconductor manufacturers need to watch the performance of their end customers ever more closely as a major part of the industry becomes increasingly tied to consumer spending patterns," Norwood says.
The loss of market share in an end application, such as mobile phones by a vendor customer can have a dramatic effect on the semiconductor vendor`s business, he says.
The performance of most semiconductor vendors this year can be traced to three major trends running through the industry: the participation in high-growth device markets such as NAND flash; gaining share in existing markets; or exposure to original equipment manufacturers (OEMs) that have been winning or losing share, Gartner analysts say.
"The first two trends are in the hands of the management of the vendor to set a clear strategy to take advantage of new opportunities, or to improve performance and to execute that strategy without distraction from everyday events," Norwood says.
The third trend, being aligned with successful OEMs, is much more difficult to achieve. In an industry increasingly being driven by consumer trends and fads, this volatility in the success of equipment vendors is only going to get more extreme, he says.
"The only approach a vendor can take is to make sure that it is not overexposed to one particular OEM or market," Norwood says.
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