Date: 05/08/2017
Semiconductor market review 2017; is there a boom due to connect and automate everything tech
After Double-digit growth in 2014, the semiconductor market is nearly flat but except for 2017, semiconductor analysts forecasting double digit growth. The IOT and wearables not reached a stage where they could make the semiconductor market to grow the way it had grown earlier due to PC, Internet and smartphone boom. The latest figures from U.S. based industry body Semiconductor Industry Association (SIA), rises the hope of growth boom for connect and automate everything technologies. Nearly most of the semiconductor vendors gravitated towards Automotive for the continous growth of semiconductor content in vehicles due to electrification and autonomous driving.
The new operating system Windows 10 by Microsoft did not really help PC market to grow that visibly. And in the smartphone market, no significant innovation has happened to drive its sales growth in double-digit, except for the demand for 4G phones and increased use of DRAM and flash memory.
Although IOT and wearables gave extra boost to the growth of semiconductor industry, but not large enough to result in to significant growth.
The products making a ordinary home a smart home are not really that value-adding and must-buy kind of a products. So application-wise no new opportunity can be compared to automotive.
The chip market is continuously becoming very cost competitive where the profit margin is diminishing as volumes rise, finally making semiconductor market a less profitable compared to software and other system engineering areas.
Every semiconductor vendor is waiting on the toes for the market opportunity and pounce on the available market to supply as many devices as possible in short time-frame to the needy market, so that the market gets matured and even obsoleted faster.
This clearly calls for a huge risk. It used to cost US$ 50 - 100 million for developing SOC chip in the 45 - 28 nm nodes, but now the cost is close to US$ 250 million to develop SOC chip at the nodes of 10 nm. Qualcomm's Snapdragon 835 is one good example of high-end SoC for volume market. Chip companies designing and selling complex SoCs can only make profit if the chip is sold in tens of millions of quantities.
The role of software in the semiconductor industry is becoming even more strategic. On the development side you need most advanced VLSI software packages to make your chip design work in first tape out. And you need to provide embedded software support to developers both for the IOT edge like products and also for enterprise computing/cloud computing applications.
The size of the company is no more giving market advantage. The big companies are seeing fall in sales revenue, and many small companies are also performing well in niche areas. Withstanding capability of bigger companies is better compared to small companies. Big companies recover fairly better than small companies. If any semiconductor companies not performing that well but has a huge cache of IP, there is another opportunity of some rich company acquiring that company.
Let's look at each area of applications and opportunities of other semiconductor industry:
Personal computer market: irrespective of lackluster growth, people need to replace their personal computers once in 5-10 years according to their financial limitations and performance of the present computers. That way there will be a minimum market for PC always available.
Enterprise computing: Due to the cost issue only few can now afford to have own data centres, however the cost of server processor chips are expected to fall due to ARM processor core based server chips launched in the market from companies such as QUALCOMM. Now there is an opportunity to build low-cost servers using open source software as well as less costing server processor chips. Does every company need cloud computer? It depends how much data the company generate, if it is huge, then to do big data analytics and other such enterprise computing, a own cloud computing or datacentre environment is required.
Mobile phones and smartphone market: The performance and features of smart phones still not reached its max, the newer smartphones still able to offer value and features interesting enough to buy at the cost of not using the present smartphone, this is not only for high-end segment but also for mainstream segment. With the 4G, 10 nm processor chips and app software which demands higher semiconductor memory will drive the smart phone semiconductor market a little further. But in future smart-phone market most probably may behave like the present PC market.
IOT market: Internet of things applications required not only high-end semiconductors but also less costing not so cutting-edge semiconductor chips which are made using 45 nm or wider nodes. The good thing about IOT market is, it covers not only electronics but nearly in every area.
Many of the non-electronics segments are not aware of electronics design and they would like to use plug and play kind of IOT hardware and software. So the semiconductor companies need to provide complete turnkey solutions for IOT enabling the systems. Since this area is still emerging, there are some unknowns which will come to be known as market evolves, and it may give rise to that big spike of opportunity.
The electric powered automotive use and self driving automotives: Not just a luxury high-end cars, even the entry-level cars embedding electronics everywhere. Each new model launched is provided with some electronics powered extra features. Transport authorities in many countries bringing some new rules and regulations for car manufacturers to follow and implement the supporting hardware which requires lot of electronics that is also driving the electronics market. Due to the success of Tesla and other electric car on the road, the electric car is becoming future. The electric car requires more electronics than fossil fuel car, mainly the power semiconductor and electronics.
The project to make the car self driving is moving faster than what people expected. Self driving car is more like a robot on wheels, there is significant amount of electronics which need to be added both inside the car and outside the car to make the car a self driving one. This is a big market, still in the embryo phase, but fast growing.
