Friday, November 15, 2013
Microsoft Will Up Semiconductor Spending Next Year
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Microsoft and Dell are showing divergent spending patterns on semiconductor chips this year as they retool strategies in a once-flourishing PC industry humbled by mobile devices.
Microsoft will be increasing its spending on wireless
applications, even as Dell fails to revive spending despite
releasing new tablets, according to insights from the
Semiconductor Design and Spend Analysis service of IHS Inc.
Microsoft's acquisition of Nokia earlier this year is elevating
the creator of Windows software to the Top 10 among overall
original equipment manufacturers (OEM) in terms of
semiconductor spending. According to IHS, Microsoft will spend
an estimated $5.90 billion next year on semiconductors, up from
$3.55 billion in 2012 prior to the Nokia deal and from $3.78
billion this year.
The massive spending will put the Redmond, Wash., company in
eighth place overall by 2014. Microsoft?s new higher standing
in 2014 also means it will be vying for fourth place in chip
spending for wireless applications?along with a group of
companies including ZTE, LG Electronics, TCL, and
Ericsson - behind market leaders Apple, Samsung Electronics and
Huawei Technologies of China. Last year Microsoft ranked 15th
overall and had no wireless communications spending. Nokia,
meanwhile, spent $3.10 billion on its own in 2012 prior to
being acquired by Microsoft.
Compared to Microsoft, Dell is nowhere near its peak OEM
spending in 2010 of $10.69 billion. In fact, spending by Dell
shrank in the double digits during 2011 and 2012, remains
basically flat this year, and is forecast to dip 5 percent in
2014 to $8.24 billion.
The two titans have faltered in their main PC business as
smartphones and tablets have taken over among consumers.
For Microsoft, approximately 37 percent of its $5.9 billion
spend in 2014 - or an amount equivalent to $2.2 billion - will be
spent next year on chips for wireless devices like smartphones
and tablets. Microsoft is enjoying success with its Nokia
Windows phones even though they run a distant third behind
Apple and Android-based smartpohnes, but the company has had a
rougher time with its Surface tablets against Apple's iPad and
Samsung's Galaxy tablet offerings.
One challenge for Microsoft will be in formulating a strategy
for success and deeper penetration of its smartphone and tablet
lines. The maker will also need to figure out how to address
the problematic position of continuing to license Windows
systems to other OEMs with devices with which Microsoft
Dell's fortunes have taken a hit since it ruled the PC industry
years ago, and questions on how to fix an ailing PC business
continue to hound the company, now taken private after a
shareholder vote in September.
For Dell?s semiconductor spend this year, 94 percent will be in
the three areas of microcomponent integrated circuits, memory
and logic, with the remaining 6 percent to flow to discretes,
analog, optical chips, and sensors and actuators.
Dell is also making a renewed effort to develop a more active
mobile portfolio, even though smartphones and tablets have not
performed well historically for the computer maker.
However, the company is announcing new tablet devices due out
in November, including 7- and 11-inch versions based on the
Windows 8.1 and Android operating systems. It will also launch
new laptops with touch-screen capability to better compete in
the weak but still crowded PC space.