Booming Apple Is World's Largest Semiconductor Buyer

Soaring sales of Apple's mobile devices have made it the world's largest buyer of semiconductors, iSuppli says. Apple spent $17.5 billion on semiconductors last year, $2.4 billion more than Hewlett-Packard, which remained focused on PCs. Apple is expected to sell 70 to 80 percent of all tablets this year as its iPad ecosystem captures buyers.

Apple surpassed Hewlett-Packard in 2010 to become the world's largest buyer of semiconductors among original equipment manufacturers, according to a new report from IHS iSuppli. Driven by booming demand for the company's iconicmobile

 devices, Apple spent $17.5 billion on semiconductors last year -- up 79.6 percent from 2009 and $2.4 billion higher than what HP paid for semiconductors in 2010.

What's more, iSuppli forecasts that Apple will continue to extend its expenditure lead this year by spending $22.4 billion on semiconductors, while HP and Samsung Electronics are expected to spend $14.8 billion and $14.3 billion, respectively.

Apple's iPhone and iPad  products "consume enormous quantities of NAND flash memory, which is also found in the Apple iPod," said iSuppli analyst Wenlie Ye. "Because of this, Apple in 2010 was the world's No. 1 purchaser of NAND flash."

High Mobile Growth Rates

A major factor behind Apple's growing semiconductor expenditures is the high growth rates for mobile devices such as smartphones and web tablets in comparison with growth rates for the desktop  PC , notebook  and server products sold by HP. According to Ye, 82 percent of HP's semiconductor spending during 2010 was dedicated to those three PC segments.

IDC expects global  PC shipments to rise just 4.2 percent this year because of heightened consumer interest in media tablets as well as rising global economic concerns. Still, the firm's analysts see microprocessor shipments in the PC market's mobile, desktop and x86 segments growing 10.3 percent this year. "Generally, the demand environment  for the second half of this year looks decent," said IDC Director of Semiconductors Shane Rau.

When it comes to robust growth, however, the tablet  andsmartphone  markets clearly offer gadget makers the best revenue opportunities. IDC predicts tablet shipments will achieve a growth rate of nearly 350 percent this year.

A total of 44.6 million media tablets are projected to ship this year, with Apple expected to maintain a 70 to 80 percent market share . Furthermore, IDC forecasts that global smartphone shipments will grow 55 percent year over year to 472 million this year, with shipments expected to nearly double by the end of 2015.

"The smartphone floodgates are open wide [with] the growth trend particularly pronounced in emerging markets where adoption is still in its early days," said IDC Senior Research Analyst Kevin Restivo. "As a result, the growth in regions such as Asia/Pacific and Latin America will be dramatic over the coming years."

Ecosystem Benefits

Apple's robust device  and media ecosystem -- which connects every Apple mobile product through iOS and iTunes -- is a major advantage, Ye observed. As a result, users of the Apple ecosystem derive  more value from each additional Apple device they buy, and have little interest in leaving the Apple realm, Ye wrote in a report released Wednesday.

"In other words, through a common ecosystem, Apple leverages each device to sell other devices," Ye observed. "Rising device sales to consumers then lead to increased semiconductor purchasing by Apple."

HP and other computer  makers don't yet have any comparable ecosystems, which means PC buyers have no vested interest in sticking with the same brand when buying a newmachine . However, HP intends to create one by leveraging webOS -- the mobile platform it acquired from Palm last year. Slated to power  HP's forthcoming Touchpad tablet, webOS will also eventually run side-by-side with Windows on the new PCs and notebooks that HP expects to release in the years ahead.