Apple will be the top chip buyer in 2012, says research firm

Apple's expenditure on chips will grow this year as demand for the company's products surges.

Apple will be the world's largest chip buyer this year because of the surge in demand for the company's products, enabling it to command lower prices and quicker delivery, IHS iSuppli said in research released on Wednesday.

The company's spending on chips will grow as competitors scale back or slow down spending on chips used in products such as computers, smartphones, tablets and other electronics, the research firm said.

Apple will spend an estimated US$28 billion on semiconductors this year, according to the numbers from iSuppli. That is much larger than second-place Samsung, which is expected to spend $14.9 billion, growing by 0.3 percent from last year.

There has been growing demand for Apple's iPad, iPhone and Mac computer products. Earlier this week, Apple said it sold 17 million iPads during the most recent fiscal quarter, growing by 84 percent from the same period a year ago. Apple's iPhone sales went up by 28 percent year-over-year to 26 million, while Mac sales went up 2 percent.

Apple dominates the electronics supply channel, and such large spending brings with it a guaranteed quota of supplies and the ability to dictate chip pricing and product roadmaps, said Myson Robles-Bruce, senior analyst for semiconductor spending and design activity at iSuppli, in a statement.

That provides competitive advantages for Apple over rivals, such as the ability to lower prices for products and faster and more reliably delivery, Myson Robles-Bruce said.

The scale of spending was a big element that helped major PC makers stabilize computer prices during the hard drive shortage resulting from the Thailand floods last year. Apple, Hewlett-Packard and Dell were able to stabilize PC prices as a larger chunk of hard drives were shipped out by storage companies to meet contract commitments, while smaller PC makers had to raise prices after acquiring hard drives at expensive prices from the open market. Large hardware companies usually stock up on components to be prepared in case of a demand surge for products.

Apple last year was one of the top buyer of NAND flash chips because of the growing demand for the company's mobile devices. Semiconductor numbers also count memory and wireless chips purchased by companies that go into mobile devices.

Apple is followed by Samsung, Hewlett-Packard and Dell. Apple and Samsung have benefitted from growing smartphone sales, while Hewlett-Packard and Dell deal mainly in servers and PCs, a market that is slowing down due to lower consumer spending and a growing interest in tablets. Tablets and smartphones dented worldwide PC shipments, which remained flat during the second quarter, according to research released by Gartner and IDC earlier this month. A name missing from iSuppli's list is Lenovo, which is the world's second largest PC maker.

Apple's spending on semiconductors will grow in coming years as the company moves into the television segment, iSuppli said. Apple offers the Apple TV set-top box with its homegrown processor, but the company is rumored to be developing a smart TV set.

But in the Americas Apple is expected to spend less on semiconductors than Cisco, which has major expenditure on set-top box and networking chips. Cisco was in seventh place behind Sony and Panasonic with expected expenditure of $8.4 billion on chips in 2012, a drop of 4.6 percent.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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Agam Shah

IDG News Service
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