Wednesday, August 15, 2007, 11:00 am

Apple design activity spurs $3.8B in semiconductor purchases

By Katie Marsal

Apple's product design activity in the first half of 2007 drove the largest increase in semiconductor spending among the Top-10 electronics OEMs in the United States, according to iSuppli.

"The huge success of the iPod and iPhone lines has made Apple Inc. one of the most influential companies in the high- tech world today, with its products widely admired by consumers and frequently imitated by competitors," the market intelligence firm wrote in its latest report. "However, Apple is wielding another kind of influence behind the scenes, with the company's Silicon-Valley-based product design activity in Cupertino, Calif. exerting a major impact on the global electronics supply chain."

According to iSuppli's Regional Design Influence Tool (RDIT), Apple achieved the fastest growth of design influence of any company in the United States during the first half of 2007. The surge boosted the company's rank to No. 4 overall, trailing just Hewlett-Packard Co., Dell Inc. and Motorola.

"The design of electronic goods leads directly to equipment production, which in turn drives semiconductor purchasing," said Min-Sun Moon, analyst, OEM semiconductor spending and design influence for iSuppli. "Companies that engage in design of electronic equipment, such as PCs, mobile phones and televisions, also are responsible for specifying the use of particular chips in the products being developed. Thus, these companies have a major influence on global semiconductor spending patterns."

Specifically, Apple's design activity in the United States is reported to have spurred $3.8 billion worth of global semiconductor purchases in the first half of 2007, up 27 percent from $3 billion in 2006. The surge in influence is attributed mostly to the recent release of the company's iPhone handset.

iSuppli forecasts Apple will ship more than 4.5 million iPhones globally in 2007, 13.5 million units in 2008 and 21.1 million units in 2009. The firm also believes a second version of the iPhone will be released in the next 12 to 18 months.

"The initial iPhone model plus the new version or versions of the product will cause Apple's design influence among electronic equipment and semiconductor spending to continue to grow into the second half of the year as well as into 2008," the firm said.

The United States led the world in terms of design influence in the first half of 2007, accounting for 34.4 percent of the worldwide total. Japan came in second with 21.8 percent.

Beyond Apple, Hewlett-Packard, Dell and Motorola, iSuppli said other leading design influencers in the United States in the first half included Cisco Systems Inc., Kingston Technology Co. and IBM.