Microcontroller prices will fall despite strong demand
By James Carbone -- Purchasing, 12/11/2008 2:00:00 AM
Electronics buyers can expect prices for microcontrollers to fall about 9% over the next year, despite double-digit unit demand growth.
Unit shipment growth will average about 10% per year over the next five years. Unit shipments will rise from 11.3 billion to 12 billion in 2009 and then to 15.6 billion in 2012.
If MCU prices were to stay flat, suppliers would see increases in revenue equal to the growth in unit demand. "However, we see price declines over the next five years, a little more so in 16-bit segment, but also with 32-bit devices," says Brian Matas, vice president of market researcher for IC Insights in Scottsdale, Ariz.
The average price of an MCU will fall from $1.26 in 2008 to $1.16 in 2009 and will continue to fall, but at a slower rate. By 2012 the average MCU price will be $1.06.
Suppliers are cutting prices because of competition for business and because of improved manufacturing efficiencies and yields in manufacturing processes.
With prices falling, the revenue from the global MCU market will decline from about $14.3 billion in 2008 to about $14 billion in 2009. The market will grow to $17.5 billion by 2012.
The wildcard is the global economic slowdown and financial crisis. Many semiconductor suppliers including MCU manufacturers started to see a drop off in October because of the financial crisis.
"In October you could feel deceleration taking place," says Ganesh Moorthy, executive vice president of Microchip Technology in Phoenix. "It is a function of our customers feeling unsure of their business. Some of them are feeling the effect of the credit crunch, especially the small and medium-size customers. They have the need for credit."
The credit crunch notwithstanding, demand for MCUs will grow at a double-digit pace for the next five years as more 16-bit devices ship. There is a transition occurring from 4- and 8-bit microcontrollers to 16-bit devices.
"There are enough applications that require simple microcontrollers, but there is also growth in demand for 16-bit MCUs from the consumer sector," says Matas. MCUs are widely used in a variety of equipment ranging from power tools and refrigerators to computers and cars.
The 4-bit and 8-bit markets combined amount to about $5.1 billion while the 16-bit market totals $4.9 billion. Matas says the 16-bit market will be larger than the 4 and 8-bit combined market in 2011. The transition to 16-bit MCUs is gradual because in many applications, 8-bit devices can be used instead of 16-bit chips.
"An application may have performance requirements based on memory size, level of integration or power consumption," says Moorthy. "Very often they can easily go with an 8 instead of a16 or a 16 instead of a 32. It depends on which one provides the highest combination of price performance features that meet with what the application requires."
Software also plays a major role, as MCUs are developed to service a wide range of applications. "With customers' own software on board the microcontroller the application can be personalized," Moorthy says.
Most new applications have a need for improved energy efficiency. An example would be motors, both in cars and in home appliances and industrial applications. Motors consume a fair amount of power and MCUs can bring the ability to make them run much more efficiently and therefore conserve power.
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