Analog chip tags to fall this year, despite strong demand

Staff -- Purchasing, 4/20/2006

The analog chip market will grow from $31.8 billion in 2005 to $34.4 billion in 2006 driven by communications, computer and consumer equipment. By 2010, the analog market will reach $47.8 billion, according to researcher IC Insights.

The good news for buyers is that the average price of an analog chip will fall from about 47¢ to 45¢ in 2006, despite strong demand, the market researcher says.

The analog market continues to grow although more equipment is digital. Even the most sophisticated technologies require analog circuits to bridge real-world signals to the digital world. Every digital device requires one or more analog interfaces, says IC Insights.

Communications equipment is the single biggest user of analog chips. Communications account for 40% of the market, while computers account for 22% and consumer 15%, according to Brian Matas, an analyst with IC Insights.

Cell phones are a primary user of analog chips. They are used to assist changing a user's voice into digital signals and then back to analog to be heard. Analog chips also process and condition the voice signal and manage the handset's power to allow longer battery life. With computers, many microprocessors require analog chips for heat and power management.

Of all the analog chips, voltage regulators and references dominate the standard analog IC market accounting for about 65% of the $11.6 billion market. The circuit provides a constant output voltage to the load irrespective of variations in output current or input voltage. Regulators and references will have the strongest growth through 2010.

Amplifiers account for 18% of the standard analog IC market and include operational amplifiers, instrumentation amps and general purpose video amps.

A key trend with analog semiconductors is the migration to low-voltage. The growth of portable applications is driving the transition to analog ICs which have voltages of less than 3.3V. Portable applications often require ICs with the lowest voltages to reduce power consumption and increase battery life.

A trend that dovetails with the low voltage transition is the migration to complementary metal oxide semiconductor (CMOS) manufacturing from bipolar, CMOS results in lower voltage lower cost parts. There is a greater amount of fab capacity for CMOS than bipolar.

The downside is that performance of CMOS does not equal bipolar and there are higher noise levels with CMOS. However, chip manufacturers say CMOS performance will catch up with bipolar and the cost benefit outweighs any performance benefits.

Another trend to watch is greater integration. Suppliers have increased functionality of their analog products by adding more analog and digital features to serve the greatest number of applications, says Matas. The growth trend is slowing because of the cost of such integration.