Powered by smartphones, Qualcomm beats Intel hollow in growth

If the boom in the smartphone market has helped any company, it is the U.S.-based Qualcomm.

The chip maker’s performance in 2011 lived up to its reputation as the most viable threat to the dominance of Intel in the worldwide semiconductor (chip) market.

According to full-year numbers released by technology market research firm Gartner, Qualcomm outperformed all other big companies in growth during the year.

It grew its sales at a blazing 39% to $10 billion, taking the top spot in growth in the industry. In comparison, the overall industry growth was just 1.8%, hit by price declines in memory chips.

Qualcomm, which powers a wide range of top-end smartphones like the Samsung Galaxy S2 Skyrocket with its Snapdragon chipset, is widely seen as a big emerging player in the overall chip market due to shifting consumer preferences.

Qualcomm, which uses ARM’s CPU technology and an in-house graphics-processor technology, will start powering laptops and servers later this year, making its threat to Intel more “clear and present.”

Chips based on ARM technology, perfected on smartphones, are more power-efficient than those based on Intel and AMD technologies and are expected to increase battery life on laptops when they hit Windows 8-powered computers later this year.

However, going by Gartner’s numbers, the firm seems to be doing just fine even before it has entered the PC and server market.

While its closest competitor, Texas Instruments, saw its business slide to $11.75 billion from $11.83 as it failed to enthuse smartphone makers with its platforms, Qualcomm’s revenue went from $7.2 billion to $10 billion (see chart.)

In fact, 2011 was another year that chipmakers would rather forget. Only two firms out of the top 10 — Intel and Qualcomm — had two digit growth, while five saw sales decline. (see chart)

The players with exposure to the smartphone markets did well, while those vested in memory chips, such as Hynix and Toshiba, saw pain.

Samsung Electronics, another chip behemoth and a customer-cum-competitor to Qualcomm in smartphones, saw revenue inch up 1% to $27.4 billion, mainly because of its exposure to smartphones.

“Broadcom had a solid year, outperforming the overall semiconductor market, with particular strength in the mobile and wireless division, which recorded another year of double-digit growth,” Gartner pointed out.

After subtracting the effect of the overall industry performance, Qualcomm led by growing 17 percent better than expected, followed by Hynix (which grew 13 percent better than expected) and Infineon (which grew 12 percent better than expected).

“Disappointments in the Relative Industry Performance index include Panasonic, Elpida Memory and MediaTek,” Gartner said.

Total worldwide semiconductor revenue reached $306.8 billion in 2011, up $5.4 billion, or 1.8 percent from 2010,

“Of the major device segments, microcomponents performed best in 2011 after a relative underperformance in 2010,” said Peter Middleton, principal research analyst at Gartner.

“Within microcomponents, the subcategory that really drove this performance was compute microprocessors, which grew 14.2 percent year over year as a result of strong average selling prices (ASPs). This was driven both by servers and PCs, with the PC microprocessor market strongly benefiting from graphics integration.”

The top 25 semiconductor vendors’ revenue appeared to grow faster, at 3.1 percent, than the industry as a whole and accounted for a larger portion of the industry’s total revenue — 69.2 percent in 2011, compared with 68.3 percent in 2010.

However, about half of this growth was the result of mergers and acquisitions.