Herfindahl-Hirschman Index
This online calculator calculates the Herfindahl-Hirschman Index (HHI), which is used to estimate the concentration of production in a product market.
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The default data represents semiconductor sales in billions of dollars by the top 15 manufacturers in 2019. The figures are summed and the calculation uses the value from the table divided by the sum, expressed as a percentage. The index is also calculated by country. You can read more about the formula for calculating the index and its interpretation below the calculator.
Herfindahl-Hirschman Concentration Index
Herfindahl-Hirschman Index
This index, usually referred to as HHI, is calculated as the sum of the squares of the shares (in percentages) of all enterprises operating in the market. This index is considered to be more indicative than the family of indices of concentration coefficients CR-n, which are calculated as the total share in the total sales volume of n largest enterprises (CR-3, CR-4, CR-6, CR-8, CR-10, CR-25).
Indeed, for the concentration coefficient CR-3, the situation when there are four producers with the shares of 70%, 10%, 10%, 10% (CR-3 = 90) does not differ from the situation when the shares are 30%, 30%, 30%, 10%. The Herfindahl-Hirschman Index gives different values, for the first case - 702+102+102+102=5300, for the second - 302+302+302+102=2800, from which we can understand that in the first case the concentration of production is higher.
The index values are usually interpreted as follows:
- less than 1,000 - low concentrated production
- 1000 to 2000 - moderately concentrated production
- 2000 to 10000 - highly concentrated production.
In the USA the index is used by the antimonopoly authorities to check merges and acquisitions - the index is calculated before and after the proposed transaction and if the index value changes more than 200 points - additional checking is required.
As it is easy to see, the maximum value of the index, 10000, corresponds to the situation with one manufacturer occupying 100% of the market. The index can also be calculated in fractions of one, then, for example, the value of 2500 will correspond to 0.25.
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