The total available market is defined as the “TAM”, while the serviceable available market, the “SAM”, is defined as the market for products sold by us (which consists of the TAM and excludes major devices such as Microprocessors (“MPUs”), Dynamic random-access memories (“DRAMs”), optoelectronics devices, Flash Memories and the Wireless Application Specific market products such as Baseband and Application Processor).
Based on industry data published by WSTS, semiconductor industry revenues in 2019 decreased on a year-over-year basis by approximately 12% for the TAM, while it remains substantially flat for the SAM, to reach approximately $412 billion and $194 billion, respectively. In the fourth quarter of 2019, on a year-overyear basis, the TAM decreased by approximately 6%, while the SAM increased by approximately 2%. Sequentially, the TAM increased by approximately 1%, while the SAM decreased by approximately 3%.
Our 2019 financial performance, with net revenues of $9.56 billion, gross margin of 38.7% and operating margin of 12.6% is aligned with the full year expectations we provided in April 2019.
We closed 2019 with a solid fourth quarter sales and financial performance. In the fourth quarter, net revenues were up 4.0% year-over-year, gross margin reached 39.3%, and operating margin was 16.7%. On a sequential basis, fourth quarter revenues grew by 7.9%, with all product group contributing to the growth, and 290 basis points above the mid-point of our guidance. Our quarterly performance was above the SAM both sequentially and on a year-over-year basis.
Our effective average exchange rate was $1.14 for €1.00 for the full year 2019, as compared to $1.18 for €1.00 for the full year 2018. Our effective average exchange rate for the fourth quarter of 2019 was $1.12 for €1.00, compared to $1.14 for €1.00 for the third quarter of 2019 and $1.17 for €1.00 in the fourth quarter of 2018. For a more detailed discussion of our hedging arrangements and the impact of fluctuations in exchange rates, see “Impact of Changes in Exchange Rates”.
Our 2019 gross margin decreased 130 basis points to 38.7% from 40.0% in 2018 mainly due to normal price pressure and increased unsaturation charges, partially offset by improved manufacturing efficiencies, better product mix, and favorable currency effects, net of hedging.
Our fourth quarter 2019 gross margin was 39.3%, 110 basis points above the mid-point of our guidance, improving sequentially by 140 basis points, mainly driven by improved product mix and better manufacturing efficiencies. Our gross margin decreased 70 basis points year-over-year, mainly impacted by price pressure and unsaturation charges, partially offset by improved manufacturing efficiencies, better product mix and favorable currency effects, net of hedging.
Our operating expenses, comprised of SG&A and R&D expenses, amounted to $2,591 million in 2019, increasing by about 3.9% from $2,493 million in the prior year, mainly due to salary dynamic, increased spending in certain R&D programs and higher share-based compensation cost, partially offset by favorable currency effects, net of hedging. Combined R&D and SG&A expenses were $672 million for the fourth quarter of 2019, compared to $629 million and $630 million in the prior and year-ago quarters, respectively. The sequential increase was mainly due to seasonality and salary dynamic. The year-over-year increase of operating expenses was mainly due to salary dynamic and increased activity on certain R&D programs, and was partially offset by favorable currency effects, net of hedging.
Other income and expenses, net, was $103 million in 2019 compared to $53 million in 2018, mainly due to a higher level of R&D grants, mainly benefitting from the grants associated with the programs part of the European Commission IPCEI in Italy and in France. Fourth quarter other income and expenses, net, was $54 million compared to negative $2 million in the prior quarter and $16 million in the year-ago quarter, reflecting higher R&D grants in Italy associated with the IPCEI program.
In 2019, impairment and restructuring charges were $5 million compared to $21 million in 2018. Impairment and restructuring charges in the fourth quarter were $3 million compared to nil in the prior quarter and $2 million in the year-ago quarters.
Operating income in 2019 was $1,203 million, decreasing by $197 million compared to 2018, mainly driven by normal price pressure, increased unsaturation charges and higher R&D spending, partially offset by higher level of grants and favorable currency effects, net of hedging. Operating income in the fourth quarter grew on a sequential and year-over-year basis to $460 million compared to $336 million and $443 million in the prior quarter and year-ago quarters, respectively, mainly driven by higher revenues, improved product mix and a higher level of grants.
Table:
 | Year ended December 31, |  | Three Months Ended |  | 
 | 2019 | 2018 | December 31, 2019 | September 29, 2019 | December 31, 2018
 | (In millions, except per share amounts) |  |  | (Unaudited, in millions, except per share amounts) | 
Net revenues | $9,556 | $9,664 | $2,754 | $2,553 | $2,648
Gross profit | 3,696 | 3,861 | 1,081 | 967 | 1,059
Gross margin as percentage of net revenues. | 38.7% | 40.0% | 39.3% | 37.9% | 40.0%
Operating income | 1,203 | 1,400 | 460 | 336 | 443
Net income attributable to parent company | 1,032 | 1,287 | 392 | 302 | 418
Diluted earnings per share | $1.14 | $1.41 | $0.43 | $0.34 | $0.46


Question: What is defined as SAM?
Answer: the serviceable available market, the “SAM”, is defined as the market for products sold by us (which consists of the TAM and excludes major devices such as Microprocessors (“MPUs”), Dynamic random-access memories (“DRAMs”), optoelectronics devices, Flash Memories and the Wireless Application Specific market products such as Baseband and Application Processor).