With the automotive sector hitting the brakes, PCs running out of desktops and consumer electronics spending heading for the deep freeze, 2009 is shaping up to be the toughest year for semiconductor suppliers since the dotcom bubble burst in 2001.
As the semiconductor industry moves from a period of expansion into what is likely to be at least one year of contraction, many suppliers are looking to revise their strategies to best cope with the chilling economic climate. For many companies this means reassessing opportunities for growth in the complex and difficult to understand industrial and medical sector.
Semicast Research has valued the industrial/medical semiconductor market at around $20 billion in 2007 and forecasts this to grow to over $33 billion in 2013. While the industrial/medical sector is by no means immune to the effects of the downturn, the diversity of its application and customer bases offers a strong foundation to support demand over the short term. In addition, US/EU economic stimulus plans to raise government spending over the duration of the downturn are certain to be concentrated in areas of high political importance, such as energy conservation, renewable energy, medical electronics and security, all of which will benefit semiconductor demand in the industrial/medical sector.
Colin Barnden, principal analyst at Semicast, commented: “Accounting for under 10% of semiconductor sales, the industrial and medical sector has historically been overlooked by many semiconductor suppliers, whose executive management dismissed it as low tech, low volume and decidedly low growth. However, with overall semiconductor revenues forecast to decline, many companies are taking their first serious look at the opportunities on offer in industrial and medical applications.”
The industrial/medical sector in practice is a mixture of sub-sectors within a sector, encompassing applications as diverse as medical imaging, lighting control and farm machinery. The following discussion reviews the opportunities for semiconductor suppliers in each of the sub-sectors in turn.
Automation and drives
Semicast judges motor drives to be the leading revenue growth driver for semiconductors in the overall industrial sector and an application which is almost certain to offer consistent growth for suppliers for much of the next decade. The automation sector comprises control and compute equipment, process measurement and field instruments, switchgear and miscellaneous applications such as pumps, robotics and welding.
Control and compute and process measurement and field instruments account for around three-quarters of semiconductor value in the automation sector.
Building automation/HVAC
This is a diverse sector covering a range of applications such as lighting control, building automation, building security, HVAC and utility metering. CCTV and video surveillance is one of the fastest growing markets for semiconductors in this sector, in response to heightened security concerns around the world.
Complexity and semiconductor content continue to rise rapidly, with increased intelligence in the camera to provide functions such as video content analysis (VCA). As a result of global warming and the need to conserve energy, electronic lighting control is also a key area for growth, along with electronic utility metering.
EPOS/payment processing/ID
While banks continue to rebuild their balance sheets following record losses, one area where they are certain to continue to invest in the short term is enhanced forms of identification and payment processing, to reduce card fraud and losses from identity theft. Overall spending on equipment related to EPOS, payment processing and identification is forecast to rise from around $25 billion in 2007 to over $40 billion in 2013, with chip cards, EPOS, card readers and transaction terminals the leading growth applications in this sector.
This is a key sector for suppliers of MCUs/MPUs looking to move into the industrial market and demand for 32-bit devices is forecast to rise significantly over the next five years.
Medical electronics
Governments in many developed countries, most notably in the US, Japan and the EU, continue to be faced with the long term social implications of a steadily ageing population. As a result, ongoing government spending on national healthcare programmes, particularly in areas such as medical imaging and diagnostics/therapy and monitoring equipment, is almost certain to be maintained in the short term.
While national spending budgets may remain flat, or even fall, in the face of the global recession, a reduction in healthcare spending is judged unlikely in any of the major economies, owing to the high political cost associated with such action. The medical sector can thus be seen as one of the safest long term growth markets for suppliers of semiconductors. Analog ICs dominate demand for semiconductors in medical electronics, accounting for around half of the total.
Suppliers should be cautious of the consumer medical sector, where margins are low and demand in 2009 will almost certainly be exposed to a slowdown in discretionary consumer spending.
Test and measurement
This sector includes application specific and general purpose equipment and instrumentation. Owing to the specialised nature of the applications, production volumes are extremely low, with digital multimeters by far the highest volume application. As such, test and measurement is forecast to remain the smallest industrial sub-sector in terms of semiconductor revenues. Analog ICs are estimated to account for approximately half of semiconductor revenues in this sector.
Power and energy
AC-DC industrial power supplies and industrial DC-DC converters are the two most important legacy applications in this sector and are forecast to continue to record strong growth, while UPS is also forecast to grow in the medium term. Over the long term, renewable energy is viewed as the key application for semiconductor suppliers in this sector.
Many of the most developed, and most polluting, countries have announced plans or legislation to decrease dependency on energy production using fossil fuels, with a corresponding increase in production from renewable sources such as hydro-electric, solar (photovoltaic) and wind. Renewable energy therefore looks certain to offer growth opportunities for semiconductor suppliers for several decades to come.
Industrial transport
Semiconductor suppliers without established automotive expertise would be well advised to approach this sub-sector with caution. Semiconductor suppliers with automotive expertise are strongly advised to consider the opportunities offered in industrial transport applications, particularly in light of the recent slowdown in the mainstream automotive market. Manufacturers of industrial transportation products such as construction equipment, heavy lifting machinery, farm machinery and forklifts are significant users of lightly adapted conventional automotive electronic systems.
For more information visit www.semicast.net
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