Intel and Samsung—two companies that supply a lot of chips to the computer industry—remain the top semiconductor suppliers, but chipmakers that supply to cell phone makers are moving up in the rankings. Meanwhile, memory IC makers are slipping.

“A couple companies that showed some of the strongest growth last year and in the first quarter were Qualcomm and Broadcom in terms of percentage growth,” says Brian Matas, vice president of research for IC Insights in Scottsdale, Ariz.

Qualcomm grew sales 29% in the first quarter of 2008 after posting a 24% revenue increase in 2007. While Broadcom increased its 2007 revenues only 2.1%, its sales grew 14% in the first quarter of 2008 to crack IC Insight's list of the top 20 semiconductor companies. Both companies supply chips to makers of high-end cell phones.

Of course Intel remains the top semiconductor company. It owns more than 80% of the microprocessor market and grew sales 7.8% in 2007, according to researcher iSuppli's list of the top 25 semiconductor companies for 2007. Its sales increased 16% in first quarter of 2008.

AMD's sales dropped 21% in 2007 due in large part to its price war with Intel. However, in the first quarter AMD grew its sales 22% as the price war cooled. AMD's ranking slipped from eighth in 2006 to 10th in 2007, says iSuppli.

Samsung, which is the leading memory IC supplier, saw its sales slip a little less than 1% in 2007. However, its revenue increased 19% in the first quarter of 2008 as memory prices began to firm.

Many memory IC makers slipped in sales rankings because of low prices for DRAM and flash in 2007. “A lot of them are way down the list because of brutal pricing,” says Matas.

Prices for many DRAMs fell by 70% last year and NAND prices fell 50%, resulting in lower revenue for many memory IC companies. In fact several slipped from IC Insight's top 20 list altogether.

“DRAM and flash suppliers were prominent in the first quarter 2007 rankings, but many are off the list in the first quarter of 2008,” says Matas. While Samsung, which makes DRAM and flash, remains number two on the list, others such as Nanya, Qimonda and Powerchip fell from IC Insights' top 20 ranking. Hynix and Micron each fell two spots.

Low memory prices affected semiconductor foundries which build memory chips for many DRAM and flash suppliers. “Over the past three to five years revenue per wafer at foundries has declined,” says Matas. In 2004, the top four semiconductor foundries—TSMC, UMC, Chartered and SMIC—had an average revenue per wafer of $1,343. By 2007 it dropped to $1,090, he says.

As a result, foundries and memory IC companies are cutting back on capital expenditures and hope to boost prices. “UMC said it needed to restore profitability to improve gross margins and plans to do it by reduced capital spending. Others are doing the same,” says Matas.

UMC, Charter and SMIC slipped in IC Insight's first quarter ranking.

With cutbacks in capital expenditures, suppliers are expecting memory prices to increase, which will mean memory suppliers' rankings may bounce back. Memory IC suppliers are confident that business will improve because computer shipments will grow at least 10% and the amount of memory per computer system increases every year.

Flash memory manufacturers are confident that solid-state drives (SSD), which use NAND flash memory, will be designed into more computers, further driving flash demand and revenue.

“We see new growth opportunities within the PC segment for flash and SSD that is spearheading that,” says Jim Elliot, vice president of marketing for Samsung Semiconductor, based in San Jose, Calif. He says the primary driver will be notebook computers although enterprise servers will also be equipped with SSDs.

Elliott says SSD will co-exist with hard disk drives (HDD). HDD has a price-per-gigabyte advantage and SSD is about performance and reliability. “They will complement each other,” he says.

With servers, SSDs will “take root quickly because of high IOPs (input/output operations per second) per dollar and per watt. SSD IOPs are about 10-20 times faster than hard drives,” says Elliott.

Large “server farms” with thousands of high-end computers use a lot of energy and will benefit from SSDs, which use a fraction of the energy that HDDs use. “Anything that can be done to reduce the power footprint in servers is going to be looked at favorably and SSD is going to do that,” says Elliott.

Notebooks equipped with SSDs offer higher performance, faster boot times and application run times and longer battery life, he says. Notebooks are also configure-to-order products, meaning buyers can choose the type of processor, the amount of memory and other features, including the drive.

More buyers will order notebooks with SSD rather than HDD, says Elliott. In some cases, notebooks will only be equipped with SSD.

Elliott says that 2008 is an “enabling year” for flash-based SSDs. A million or so will ship. Next year will be a breakout year with sales reaching about 10 million growing to 30 million in 2011, he says.

Samsung is bullish on drives and is investing in flash memory capacity to meet expected demand, according to Elliot. He says next year Samsung will make about $8 billion in capital expenditures for memory ICs. Much of that investment will be for flash SSDs.

The amount of capital expenditures that Samsung is making will be flat compared to 2007.