Monday’s debut of the annual Fortune 500 list settled once and for all that the semiconductor industry ruled tech in 2021.
An encore in 2022, however, might prove hard to manage.
Several chip industry leaders scaled this year’s rankings—which identify the largest American companies based on total revenue in fiscal 2021—as sales boomed and a semiconductor shortage fueled demand. With the exception of the energy and raw materials sectors, no industry saw such significant growth in the top half of the list.
While revenues rose for nearly all semiconductor companies, a standout quintet illustrated where the largest gains were made: specialty chip design and production equipment.
Advanced Micro Devices made the most ambitious leap of the group, shooting up 83 spots to No. 226. Customers gladly stomached higher prices for the company’s personal computer and graphics chips, while sales in its data server processor, semi-custom chip, and gaming unit doubled.
Nvidia also climbed up the rankings, jumping 50 spots to No. 134, on the back of huge gains in sales for gaming, crypto mining, cloud computing, artificial intelligence, and high-tech visualization chips. The Santa Clara-based company saw revenues rise 61%, hitting nearly $27 billion, and profits more than double.
Qualcomm also rose 17 spots, hitting No. 107, after revenues jumped at least 50% across all four of its chip divisions (handsets, wireless, automotive, and Internet of Things).
Meanwhile, two companies supporting the semiconductor industry’s backbone shot up the rankings. Lam Research, a wafer fabrication equipment and services company, reached No. 250 after leaping 54 spots. Applied Materials, a provider of chip manufacturing equipment, supplies, and software, jumped 20 spots to No. 156.
Those five companies profited off the ever-growing demand for chips in the fast-evolving tech landscape, where several of the Fortune 500’s largest players—Amazon, Apple, Alphabet, Microsoft, Verizon—are increasingly dependent on a web of semiconductor suppliers. The nonprofit World Semiconductor Trade Statistics reported in April that global chip sales reached $556 billion in 2021, up 26.2% year-over-year.
Notably, the quintet saw revenues rise by a combined $37.4 billion in 2021, yet none of them reported a gross margin increase greater than three percentage points.
The latest rankings also showed how Intel, still far-and-away the largest U.S. chip company, continues to cede ground to its scrappier domestic counterparts.
The industry heavyweight slipped six spots on the Fortune 500 list, falling to No. 46, after revenues rose just 1.5%. Intel hopes to rebound with a pivot to chip manufacturing for other companies, a potentially lucrative business dominated by Taiwan Semiconductor Manufacturing Company, though skeptics worry that the hugely expensive and time-consuming shift might not pan out.
While 2021 produced record sales for the sector, chip researchers warn that this year won’t be so fruitful. World Semiconductor Trade Statistics, Gartner, and Deloitte all predict that the industry’s growth will slow to 10% to 15% in 2022, the result of continued supply chain shortages and a slight taper in demand.
Those forecasts have weighed on chip stocks amid a broader market selloff. Shares in the sector’s five Fortune 500 fast-risers are all down between 19% (Applied Materials) and 45% (Nvidia) so far this year. As MarketWatch reported in late April, analysts with semiconductor coverage also worry that chip companies will ramp up production to meet the current shortage, only to get stuck with excess inventory if demand cools.
“Our sense is violent swings will be the new norm [both up and down] until we gain line of sight to whether we will see a soft or hard landing,” Evercore ISI analyst C.J. Muse wrote in an investor note, per MarketWatch.
The semiconductor industry’s immediate future might look a bit unsteady, but at least in 2021, much of America’s chip sector cashed in.
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Jacob Carpenter
NEWSWORTHY
A potential tech blockbuster. Broadcom is discussing an acquisition of cloud-computing company VMware, a deal that could bolster the chipmaker’s recent venture into the software sector, Bloomberg reported Monday. Sources familiar with the talks told Bloomberg that negotiations were ongoing, though there is no guarantee that a deal will be reached. Bloomberg could not confirm a potential purchase price for VMware, which saw its market cap jump to $48.7 billion after company shares spiked 20% in mid-day trading Monday on news of the potential acquisition. Broadcom shares slid 4% in mid-day trading.
Not even a little something? European Union Central Bank President Christine Lagarde dismissed crypto assets as “worth nothing” and called for global policies designed to protect investors, CNBC reported. The comments, aired in an interview Sunday, underscored growing frustration among governmental regulators in the U.S. and Europe who argue that the recent downturn in crypto values cast doubt on the long-term viability of such assets. Lagarde said she’s more open to virtual currencies developed by central banks, calling a digital Euro “vastly different” from other cryptocurrencies.
Ready to break out. Apple officials want to shift some manufacturing from companies in China amid frustrations with the central government’s strict COVID-19 lockdowns, The Wall Street Journal reported Saturday, citing sources familiar with the matter. Apple executives have started discussions with contract manufacturers about moving more production into India and Vietnam, among other countries, the Journal reported. About 90% of Apple products are currently assembled in China, a large footprint that closely ties the company to an authoritarian regime.
What’s another few billion? Hyundai disclosed plans Sunday to invest another $5 billion in U.S.-based production of various technologies, building on a $5.5 billion commitment made last week to build electric vehicles and batteries in Georgia, Reuters reported. Hyundai officials made the announcement alongside President Joe Biden, whose four-day tour of Asian allies wraps up Monday. The $5 billion investment will go toward developing autonomous driving, artificial intelligence, and robotics technologies, among others.
FOOD FOR THOUGHT
Might just stay home. Your digital data might soon need a passport to travel between dozens of countries—if it’s even allowed into foreign lands. As The New York Times reported Monday, more than 50 countries are taking steps toward regulating the export of online data generated by their citizens, arguing that the unfettered flow of information threatens economic and national security interests. While the U.S. has generally supported international data-sharing, government officials are increasingly worried that China and other authoritarian states could gain geopolitical advantages by obtaining information about Americans. The European Union, meanwhile, remains skeptical of Silicon Valley giants that profit off the immense amounts of user data they collect.
From the article:
The core idea of “digital sovereignty” is that the digital exhaust created by a person, business or government should be stored inside the country where it originated, or at least handled in accordance with privacy and other standards set by a government. In cases where information is more sensitive, some authorities want it to be controlled by a local company, too.
That’s a shift from today. Most files were initially stored locally on personal computers and company mainframes. But as internet speeds increased and telecommunications infrastructure advanced over the past two decades, cloud computing services allowed someone in Germany to store photos on a Google server in California, or a business in Italy to run a website off Amazon Web Services operated from Seattle.
IN CASE YOU MISSED IT
Binance CEO asks users to report ‘suspicious’ activity to its tip line, after reports flag insider trading on crypto exchanges, by Nicholas Gordon
The number of women running Fortune 500 companies reaches a record high, by Emma Hinchliffe
‘You’re literally burning money’: Luna creator Do Kwon baffled as holders volunteer to torch their own crypto to save the coin, by Christiaan Hetzner
Musk calls Twitter’s explanation of its bot numbers ‘very suspicious’ as he suggests slashing the value of his takeover bid, by Nicholas Gordon
Goldman Sachs and Bank of America have very different calls for when stocks will hit bottom, by Bernhard Warner
Mark Zuckerberg sued over role in Cambridge Analytica data breach, D.C. Attorney General says, by Erik Larson and Bloomberg
The surprising heart of drone technology is on the Choctaw reservation in Oklahoma, by Jesica Mathews
Meta quietly banned abortion talk among Facebook workers in 2019. Is that even legal?, by Colin Lodewick
BEFORE YOU GO
Under pressure. Dialing 911 seems like a simple act, but there’s a complex tangle of technologies that underpins this vital lifeline. As a result, it’s surprisingly difficult to modernize the system, which still operates on systems straight out of the ‘80s. A Protocol report Saturday details just how hard it is for local governments to make much-needed upgrades to 911, such as moving the system into the cloud. That shift could produce big benefits, such as reducing infrastructure needs in small towns and limiting disruptions during disasters. But many municipalities worry that their 911 service could fall offline during even the slightest migration, with any momentary lapse potentially proving the difference between life and death.
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