Apple, Samsung among top ten chip buyers cutting spends

Top ten global original equipment manufacturers (OEM) including Apple, Samsung, Lenovo, and BBK reduced spending on chips by 7.6% in 2022 as demand for smartphones and PCs declined due to inflationary pressure, Gartner said in a new global report, released on Monday.

Apple was the highest spender on chips with 11.1% of the market share for the fourth consecutive year. Samsung accounted for 7.7%, Lenovo 3.5%, while both Dell and BBK made up 3% each of the global spendings on chips. 

Most of the top ten electronic companies cut their spending on chips in 2022. For instance, Apple reduced spending by 2.6% while Huawei reduced it by 19% and HP by 18.9%. 

Samsung and Sony were the only two companies in the top ten that increased their spending by 2.2% and 16.5%, respectively. Gartner attributed Samsung’s spending on foldable smartphones while Sony's purchase was driven by the sustained demand for PlayStation 5 consoles. 

According to Gartner, Apple reduced its spending on microprocessing units (MPUs) by 11.7% as it shifted to its in-house-designed application processors. However, Apple has increased spending on non-memory chips by 2.8%. Unlike CPUs which handle a wide range of functions, microprocessors are meant to execute specific and repeatable actions. 

Analysts at Gartner attributed the spending cut to the rising average selling price (ASP) of chips. Masatsune Yamaji, senior director analyst at Gartner said the zero-covid policy in China led to serious material shortages and short-term disruptions to the electronics supply chain. 

“A lingering semiconductor shortage in the automotive, networking, and industrial electronics markets, raised chip average selling prices (ASPs) and accelerated semiconductor revenue increases in these markets. Consequently, these factors resulted in the top OEMs decreasing their share of overall semiconductor spending in 2022 from that in 2021,” added Yamaji.

Though chip supply has eased, the demand for electronics has declined due to inflation and the fear of recession. This has led enterprises to cut spending on IT hardware while users have postponed buying new devices for the time being. Most companies have also slashed thousands of jobs. HP announced in November that it will slash up to 6,000 jobs by 2025. Microsoft and Google have also slashed over 20,000 jobs together. 

The reduction in spending on chips is also expected to impact revenue for chip suppliers. 

Last November, Gartner revised its global semiconductor revenue decline estimates from 2.5% to 3.6% for 2023. According to new estimates, the semiconductor industry is expected to generate $596 billion in revenue in 2023 as opposed to a previously estimated $623 billion.