NEW YORK ( TheStreet) -- Chip companies earned a putrid 4% cumulative growth in 2012. As 2013 dawned, many analysts predicted that the year that semiconductor stocks revived. Let's just say expectations fell short.
This optimism was due in part to expectations of growth in telecom equipment. Analysts also claimed that significant gains would flow to the suppliers of parts for mobile device giants like Apple
(AAPL) and Samsung
These predictions rang only partly correct. What the Street didn't expect was that the entire sector was going to be marred by weak margins due to lower average selling prices of high-end handsets.
Giants like Broadcom
(BRCM), which also has a strong wireless and mobile business, suffered weak revenue growth. But investors always assumed that the company would overcome its struggles. Essentially, it was business as usual.
Investor optimism lasted until the second half of 2013. Then market leader Qualcomm (QCOM - Get Report) issued weaker-than-expected guidance.
Essentially, when a company with a strong track record of beat-and-raise quarters has to lower estimates, the you-know-what has hit the fan.
Panic spread throughout the sector, suggesting that Qualcomm's reign over the chip industry was coming to an abrupt end. There were also rumblings about threats to Qualcomm's chipset margins, which had come under pressure.
Despite how weak the numbers look, Qualcomm's results were always better than its closest rival.