The numbers are in: The overall communications-semiconductor and optical-component market contracted a whopping 38 percent in 2001. Demand-side factors such as the global economic slowdown, decreased IT spending by enterprises and decreased capital spending by telecom carriers-coupled with the oversupply of components seen at the beginning of last year-conspired to challenge suppliers.
With the exception of a few emerging-product markets-such as Bluetooth and wireless LAN chip sets, and network processors-nearly every product market contracted 30 percent or worse.
Although Agere lost share in 2001 because of its exposure to the hardest-hit markets (those related to optical networking), it managed to retain the top position in Gartner Dataquest's overall rankings, which combine optical components and semiconductors. Intel nabbed the top slot from Motorola when optical-component revenues were stripped off.
Most companies' businesses contracted in conjunction with the overall industry. Cellular chip set provider Qualcomm stands out as an exception, having grown nearly 15 percent. Intel jumped to the fore because much of its revenue derives from sales of flash memory-a business that fared relatively well-and because it gained share in the LAN adapter market. Its relatively strong performance enabled it to climb in the overall rankings to the second spot.
Looking at just optical components, JDS Uniphase unseated Nortel Networks as the top supplier. Nortel fell to fourth in the rankings after a 79 percent revenue decline. Alcatel Optronics is the only optical-component vendor to have eked out growth, in part because of its exposure to the European telecom market, which began its decline later than the North American market. In addition, internal sales to Alcatel offset merchant sales declines.
Gartner Dataquest expects 2002 communications semiconductor revenue to be roughly even with 2001's. The cellular market began to recover in the second half of 2001, and the LAN market is showing signs of strength. Given the economic recovery expected in the second half , those markets should perform relatively well, and their suppliers should gain share.
But communications component markets that rely on carrier capital spending will suffer until spending rebounds, most likely in 2003. Individual companies may see sequential quarterly growth as sales start to track consumption , but market growth will be limited.
Jeremey Donovan ( Jeremey.Donovan@Gartner.com) is chief analyst at Gartner Dataquest.
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