Expect price erosion for CE chips
James Carbone -- Purchasing, 9/16/2004 2:00:00 AM
Growth in demand for consumer electronics (CE) equipment such as digital televisions, DVD players and recorders, and digital still cameras will help drive semiconductor growth over the next five years.
CE equipment growth will mean increased demand for a variety of semiconductors, including digital signal processors, analog to digital converters, logic and memory ICs among others.
Despite the growth in demand, prices for many chips used in CE equipment will fall because of stiff competition. Consumers demand lower prices from manufacturers and that price pressure gets driven down to chip suppliers.
The consumer electronics equipment market will grow from $224 billion in 2003 to $282 billion in 2008, according to market researcher iSuppli. At the same time, semiconductors used in CE equipment will rise from $38.8 billion to $60.8 billion.
The growth in demand will be important to many chip companies including Texas Instruments, Zoran, Media Tech, ESS Technology and LSI Logic.
"Consumer electronics is a big driver for semiconductors," says Shyam Nagrani, principal analyst, consumer electronics for iSuppli. "About 20% of the entire semiconductor market is chips that go into consumer electronics products," says Nagrani.
He says digital televisions will be a big driver for chips in coming years. "Digital TVs show the highest growth and are driving the market. The amount of semiconductors that go into digital televisions is large especially with the FCC mandate to build digital receivers into TVs. That is increasing the semiconductor content substantially," says Nagrani.
DVD recorders will also grow rapidly and will likely eclipse DVD players in sales next year. Cell phones equipped with cameras will be another big growth driver for semiconductor suppliers as about 200 million such units will ship in 2004.
These devices are all packed with a variety of semiconductors. For instance, a digital television has a video decoder chip, an analog to digital converter, a controller, timing circuits, logic chips, and memory ICs, among others.
While demand is growing for chips used in CE equipment, it won't result in any supply issues for other semiconductor consuming segments. Reason: CE equipment tends to use more mature chips from older technologies. An example of this is DRAM, which is used in computers and digital televisions. An average PC has about 512 megabytes of double data rate (DDR) memory. A digital TV is equipped with just 64 or 128 megabytes synchronous DRAM. SDRAM is not used in PCs anymore for the most part. When PCs switch to DDR II DRAM, digital TVs will likely move to DDR DRAM.
Some say the CE industry is similar to the auto industry for chip suppliers. They both use more mature parts, volumes in both industries are high, and both industries demand price reductions every year.
Because consumer devices require trailing edge technology, CE equipment will extend the lifecycles of many parts and technologies, which is good news for chipmakers and buyers in other industries who purchase the same parts.
Semiconductor use in consumer electronics
(annual, global sale, $ billions)
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |
| SOURCE: GARTNER DATAQUEST |
||||||
| General Purpose | 15.400 | 19.300 | 21.900 | 22.300 | 24.700 | 27.00 |
| Memory | 2.500 | 3.400 | 3.700 | 3.100 | 3.400 | 3.80 |
| Microcomponent | 3.100 | 4.100 | 5.100 | 5.100 | 5.900 | 6.70 |
| Logic IC | 1.400 | 1.700 | 2.200 | 2.500 | 2.900 | 3.40 |
| Analog IC | 2.600 | 3.100 | 3.400 | 3.700 | 4.200 | 4.50 |
| Discrete | 3.100 | 3.400 | 3.500 | 3.600 | 3.700 | 3.70 |
| Optical | 2.800 | 3.500 | 4.000 | 4.300 | 4.500 | 4.90 |
| Nonoptical Sensors | 0.019 | 0.025 | 0.041 | 0.043 | 0.045 | 0.05 |
| Application Specific | 13.900 | 16.200 | 19.200 | 20.300 | 22.200 | 25.40 |
| ASIC | 3.900 | 4.200 | 4.700 | 4.900 | 5.300 | 5.70 |
| ASSP | 10.100 | 12.000 | 14.600 | 15.400 | 17.000 | 19.70 |
| Total | 29.400 | 35.500 | 41.200 | 42.600 | 47.000 | 52.40 |
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