Expect power IC tags to fall

By David Hannon -- Purchasing, 3/22/2001

Prices for power ICs will fall through the first half of the year, but the long-term picture is less clear and there is a chance of shortages later in the year. Prices dropped in the first quarter because of overproduction last year and weak demand in the Q4.

While tags are falling in the short term, the longer-term outlook for the power IC market is healthy. Market researcher Frost & Sullivan forecasts that the power IC market will grow at 12.4% with revenue reaching $6.02 billion by 2002.

"We see excess inventory available on power ICs during the first quarter of 2001 and capital expansion at a reduced rate from most analog IC suppliers," says John Trice, director of active components supply network at iSuppli, a supply chain management facilitator. "Multiple suppliers brought on significant new capacity in 2000 to keep apace of the market surge." Trice predicts adequate power IC supplies through much of the year, but pricing pressure will result and the market for PCs, cell phones and other electronic devices will surge in late 2001. Trice says by Q1 of 2002 capacity pressure will be felt again.

"We expect that 2001 will show moderate growth, as consumer demand uses up material that is already in the channel," says Peter Henry, director of portable power systems at National Semiconductor in Santa Clara, Calif. We remain positive about the long-term outlook. As in any market recovery, the ability of a manufacturer to respond to upturns will be critical," he says.

Demand will be strong for power MOSFET s (metal oxide semiconductor field effect transistors). iSuppli predicts significant shortages of high-voltage power MOSFET s in third quarter 2001. Trice expects several suppliers to exit the high-voltage power MOSFET market due to poor profitability and silicon utilization. The resulting shortages will trigger price increases, Trice says.

New demands

The growth in power ICs is due primarily to the increase in demand for portable, battery-powered devices, which emphasize power management. For example, iSuppli says the demand for lower cost, higher-performance personal computers and laptops will more than double the demand for power-management components over the next couple of years. A recent Frost & Sullivan report says strong demand for portable communication devices will fuel power IC growth through 2002.

While notebook computers have been fueling much of the demand in recent years, the smaller portable digital assistants (PDAs), cell phones and even portable MP3 music players are on a faster growth curve.

"You'll see even faster growth in handhelds and in those areas where battery life and density is important," says David Bell, general manager at the power business unit of power IC maker Linear Technology. Trying to make the product smaller and improve the run time of the battery pushes demand for power ICs." Bell says the second half of 2000 saw some supply capacity limitations in many product types, but those are easing now and leadtimes are returning to normal.

Henry says the power demands in devices such as handsets, cameras and PDAs will increase dramatically in order to drive new features such as fast data, video capabilities, MP3 and GPS. This couples with a consumer requirement to maintain battery lifetimes and the demand for smaller and lighter devices, so the requirements for high-efficiency, small power devices is growing rapidly.

iSuppli predicts that for 2003 and beyond, the use of high-voltage power-management components in the automotive industry will grow by more than 800%. The industry's focus on developing hybrid automobiles and increasing use of electronic devices in the average car has put a greater emphasis on power consumption, thus increasing the need for power ICs in the automotive industry. Bell points out that using simple linear regulators today in automotive electronics is unacceptable because of the requirements to dissipate the heat generated by those components.

"And in power circuits, thermal dissipation can become a concern," says Henry, also pointing out that the efficiency of the converter limits the heat generated, so moving to switching regulators and charge pumps goes a long way toward minimizing the heat problem.

The size of the individual chip becomes a greater concern when more chips are incorporated into a single device. Reducing the size of the power IC chip is listed by Frost & Sullivan as one of the top four industry priorities right now. Others include reducing heat generation, reducing circuit resistance, and increasing integration and functionality.

"Especially in portable equipment, size is a key design parameter," says Henry. "We also strive to integrate many functions into a single device to reduce size." The higher peak current rate of the Intel Pentium series processors is increasing package size for power management components and will increase consumption of silicon.

New guests at the party

The power IC marketplace has seen some market consolidation as a result of acquisitions and mergers. In a recent report, Mark Gaboriault, director of Venture Development Corp. DC's power conversion and control practice, says some of the market moves were made to focus on certain market segments, while others were made for pure business reasons. Trice says some discrete makers like Intersil and Vishay-Siliconix are refocusing their portfolios to emphasize analog power ICs.

Both Henry and Bell say the increased demand for power ICs has drawn a new crop of small players to the market.

"The companies that rely on older technology, in design, packaging and process, will have a very difficult time meeting the needs of the market over the next few years," Henry says. "Some of the start-ups are betting that they can develop new design technology and get it into the market at a reasonable cost before the established players, but many of the established players are making a very strong effort and investing heavily in new power management solutions. The playing field will be driven by cost, efficiency, size and a holistic system approach to minimizing overall power dissipation."

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