Strong growth for communications ICs
By James Carbone -- Purchasing, 12/10/1998
Seemingly endless demand for cellular phones, pagers, and modems will result in the communications IC market doubling from $20.8 billion in 1997 to $45.1 billion in the year 2002. In fact, while the overall semiconductor market will fall about 5% this year, the communications IC will be the only segment to post positive growth.Driving growth of communications ICs are cellular phones, pagers, global position satellite systems, and networking equipment. "The forecast is for cell phones to double over the next few years," says Bill McClean president of IC Insights. "It's not just handsets, but the infrastructure. Bay stations require a lot of semiconductors."
Microcomponents such as microcontrollers and microprocessors represent the biggest part of the communications IC market. In 1998, 66% of microcomponents shipped to communications equipment manufacturers are microcontrollers.
However, growing demand and more stable pricing will result in analog chips accounting for 30% of the communications market, about two percentage points more than microcomponents. While analog chips will represent a larger share of the communications chip market, that doesn't necessarily mean that telecom buyers will be buying more analog semiconductors than MCUs or memory. Digital semiconductors, such as memory and MCUs, have been under a lot of price pressure because of oversupply. However, analog chips have had less price pressure.
"Analog is structured differently," says McClean. "The competitive situation isn't as fierce. There's no overcapacity as there is with digital so you don't get the pricing wars," he says.
The communications IC market overall is forecast to be the fastest-growing chip segment. It will gain over three points of marketshare from 1997 through 2002 when it will represent 20.5% of the entire semiconductor market. However, the computer industry will continue to demand the most semiconductors, consuming 56.5% of all chips manufactured.
Computers tend to use higher-price chips such as microprocessors and they contain memory ICs. Generally, the electronic content of computers is higher than in telecom equipment such as cell phones or pagers. "Some communications equipment use digital signal processors, but they don't carry the price of a Pentium II chip," notes McClean.
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