Trends and Revenue Aspect of Semiconductors in Communications
By Aravind Seshagirl, Program Manager, Global Semiconductor Research, Frost & Sullivan
Today, communication plays a very important role in the semiconductor industry. With the advent of Smart Phones and demand for more intelligent applications desired by Gen-Y, communication industry is a strong contributor for the semiconductor industry.
Communication semiconductors are classified in the following manner:
• Flash Memory
• Mobile RF
The communication industry contributes to nearly 27 percent of the total semiconductor market revenue worldwide. This share has grown in the recent years owing to increased devices being deployed and new markets being explored. Although there was a slowdown in 2009, rate of growth of industry, specifically the mobile segment, had not been significantly affected. The global communication semiconductors market is still in the growth stage; however, regional complexity and requirements have been a challenging factor in its growth and rate of technical adoption of new standards.
With 3G being deployed worldwide, more countries are moving toward this universal global standard, which is likely to unify the global communication standard.
The projection for semiconductors in Communication is given below considering the trends and dynamics in the market place.
While the industry is on a growth phase with products like smart phones, tablets, notebooks penetrating into the market very rapidly including the emerging nations, technologies such as 3G and Long Term Evolution (LTE) are supporting the ever changing requirements from the customers for the way data is presented with a vast range of applications.
Like other growing segments, communication also faces few challenges that the key industry players should take note of:
• Increasing miniaturization and the need for low power dissipating components along with the integration issues, all pose a greater technical challenge to the manufacturers
• The cost of new technology adoption increases the manufacturing costs. However owing to intense competition, selling costs are kept at minimum. This has drastically reduced the returns for the component manufacturers
• New manufacturers, particularly the Asian players are posing increasing threat to the existing established players. This is mainly attributed to their economical production capability and access to local markets
• Increasing counterfeits in semiconductor products pose a major threat to the entire industry in terms of brand damage, system failure, profit loss etc. This is more prevalent in the Asian market
With all the above challenges, the communication market offers opportunity with key drivers that are much more attractive to device manufacturers and service and solution providers. Some of the drivers Frost & Sullivan observes are as follows:
• Globally, customer spend has increased in the past two years after the global economy recovered from the 2010 slump, this has also helped in manufacturers spending for design and development of a portfolio of products. As a result sales have improved worldwide.
The growth in emerging countries as well as increased spend in developed countries has allowed the corporate and enterprise users expand their applications portfolio and adopt for new technology devices.
• The rise of mobile sales, specifically in the APAC regions owing to new features introduction and improvised technology have led to widespread adoption of mobile applications. This has raised the global demand for RF semiconductors.
• New and varied applications are increasingly being deployed and this has raised the demand for semiconductors globally.
• The rise in handheld devices that are expected to be connected wirelessly wherever the customer is; has driven the need for newer products and solutions, helping the growth in semiconductors in communications devices.
• Large companies such as Texas Instruments, Broadcom, Marvel Semiconductors to name a few, have been working on integrated RF platforms that provides a combination of different chipsets such as Bluetooth, GNSS, FM and WiFi that has resulted in device manufacturers to effectively provide solutions to their customers. Companies that have developed this combinatorial chipset have focused on providing both power and thermal solutions that have been a black spot in the emergence and use of smartphones.
While the communications market is expected to grow significantly, the price of devices is likely to stabilize and come down reasonably in the next two years that in turn will keep the revenue growth rate intact.
Frost & Sullivan’s research suggests that:
• The market is likely to be stable in terms of technology growth.
• There will be gradual growth in technology, and the rate of technical change that will be incorporated in semiconductor manufacturing will also be lower.
• The expected CAGR for 2010-2017 is 9.68 percent.
• With new markets being increasingly deployed with the latest advancements, the communication semiconductors market as a whole is likely to witness good growth in the next five years.
• Prices are expected to decline in medium term.
• Along with growing demand and integration of components, trends also point to high prices of components to come down in the forthcoming years.
Trends and Revenue
Digital Signal Processors (DSP) in Communications
DSP is traditionally used in mobile communications. With the penetration and wide acceptability of phones and mobile telecommunication this segment will grow, but being a matured market and with new players moving in the market revenue will remain flat. However new growth opportunities are majorly focused in areas such as military, industrial, consumer and automotive. The market is sized at $6.7 Billion in 2012 with TI taking the major share. Pricing pressure will be a major constrain for revenue growth.
The market is likely to remain positive during the medium term. There is expected to be significant growth in the DSP chipset market owing to increased sales of mobile and other related communication devices. This is anticipated to propel the market for the next 3-5 years. The expected CAGR for 2010-2017 is 3.6 percent and is mostly contributed from the Asia. The competition is likely to intensify in the short run. The DSP market is highly competitive, and it has turned out to be more intense in the recent years with more participants. With growing demand and integration of components, prices are expected to decrease in the near future.
Flash Memory in Communications
Flash Memory is being seen as an important trend in the consumer segment. With faster throughputs and better power management compared to traditional Hard Disk Drives (HDD), it is expected that Flash will replace most of it in the portable and small category of the consumer electronics by the 2015-2016 timeframe.
The market is likely to witness high growth during the medium term. With growing demand for flash devices in all handheld segments, the demand is likely to be high for the next five years. The expected CAGR for 2010-2017 is about 12.2 percent. As more new geographic segments are expected to drive the ongoing demand for flash chips, market growth is likely to be high during the forecast period. Prices are expected to decline in the long term. With improved technology and demand, prices are expected to decrease. New technology is expected to replace current processes in the long term. The physical limit has almost been reached in the manufacturing process; thus, new methods and techniques are being tried out constantly.
GPS in Communications
GPS units are no longer offered as stand-alone unit and are being replaced by integrated systems in smart phones and portables. With cheaper unit pricing it is expected that GPS segment will have larger adoptability. However with cost structure falling and technical integration with Wi-Fi, Bluetooth and mobile RF is causing pressure in top line growth. Power consumption and reliability are also important technical considerations when designing GPS systems.
Though Frost & Sullivan witnesses a significant integration of GPS chipsets, we observe that the GPS market is likely to continue to witness close to 10% growth rates in the medium term. This is mainly due to the increased sales of smart phones and Personal Navigation Device in newer regions. However, over the forecast period, Frost & Sullivan expects that the CAGR for GPS during the years 2010-2017 is 8.5 percent. Asia Pacific and European markets are anticipated to utilize most of the GPS chipsets in the short term owing to the recent 3G deployments in these regions.
Mobile-RF in Communications
Mobile RF segments are growing with the mobile and communication segments. Increased competition, falling price structures and greater abilities driven by smart phone and user demand has caused Mobile RF to become costly in design and R&D. This market however will also grow with the deployment of 3G, 4G and Wi-Max in emerging regions. Power consumption, integration and interoperability are the challenges that companies in this space are looking to focus and address. Design and R&D cost are rising due to increased requirements and technical complexities
W-CDMA shipments will be the highest and this will be followed by EDGE and GSM technologies as of the contribution to the RF market. The CAGR for 2010-2017 is estimated to be 6.3 percent, which is mainly due to increased demand from new emerging regional markets. Of the total data transfer demand, video traffic will account for more than 55 percent, and this share is likely to rise in the near future. Mobile shipments are expected to drive the market, particularly in Asia Pacific.
WiFi/WiMax in Communications
Wi-Fi is majorly driven with the adoption in the mobile and consumer segments. With connective mp3 and smart phones, this segment is poised to make growth in the consumer segments. Wi-Max has still to be accepted and adopted in most segments. It is expected to grow with it being implemented alongside 4G. Wi-Max is considered to be the Wi-Fi over larger range (<50Kms). However with competition against Wi-Fi and LTE technologies, it faces challenges in adoption.
Enterprise spending is likely to rise in the future, and this is expected to account for a majority of the Wi-Fi market revenue in the medium term. The CAGR for 2010-2017 is estimated to be 14.3 percent. Unit shipment is forecast to reach 1 billion by 2014, that is, a major growth. With technology becoming ubiquitous, more consumer end products are likely to be deployed with Wi-Fi.
With new application areas (such as near field communications (NFC)) are being tested, it is likely to expand the end-user scope, particularly in the communications segment. New services such as personalized, location-based online services shall be offered to customers; this is likely to increase the competition in the service offerings market. Partnerships and acquisitions will be predominant among participating companies in order to withstand the industry competition.
With the new learning, awareness and growing requirements from the Gen-Y and the rapid development of newer applications in the smart phone and tablet space, Frost & Sullivan expects communications segment to witness a significant growth in the next 5 years. This will enable the semiconductor players that focus in this communication segment to directly benefit from this growth.
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