Findings from the recently published report on 32/64-bit Microcontrollers (MCUs), Embedded Microprocessors (eMPUs) and General Purpose DSPs suggest steady and on-going growth for this market, despite the current economic uncertainties particularly affecting confidence in the US, Europe and Japan. Total revenues are forecast to reach $8.6 billion in 2008, up from $8.1 billion in 2007, and to grow steadily in each year over the period to 2013 to $14.2 billion, a CAGR approaching 10%.
Consumer electronics is likely to suffer a significant decline in 2009, as the full effects of the economic problems move beyond Wall Street to take effect on Main Street and consumers adjust to a toxic mix of increased job uncertainty, falling disposable incomes, rising loan rates and declining values in savings and pension plans. Accordingly, demand for products such as LCD TVs, MP3 players, DVD players, digital cameras and cellphones is likely to weaken considerably in the short term, and with it the prospects for semiconductor sales in consumer electronics.
However, unlike other parts of the semiconductor industry, consumer electronics and consumer sentiment has a relatively small direct effect on short term growth prospects for 32/64-bit MCUs/eMPUs and DSPs. Consumer electronics accounts for a relatively small portion of demand for these products, with more secure industries such as automotive, industrial/medical and communications infrastructure accounting for the majority (about three-quarters) of revenues. These industries are demonstrably less affected by the “boom and bust” cycle which is so prevalent in the semiconductor industry as a whole and as a result, revenues for 32/64-bit MCUs/eMPUs and DSPs are likely to hold up in the face of uncertainty throughout 2009.
With many industry executives no doubt still mindful of the semiconductor industry crash of 2001, when overall revenues fell over 30% compared with 2000 as the “dotcom boom” ended so abruptly, Semicast summarizes its judgment for prospects in some of the less glamorous, but more secure, applications for 2009/10 and their growth prospects for suppliers of 32/64-bit MCUs/eMPUs and DSPs.
Medical Electronics: Governments in many developed countries, and most notably in the US, Japan and the EU, continue to be faced with the long term social implications of a steadily aging population. As a result, on-going government spending on national healthcare programs, particularly in areas such as medical imaging and diagnostics/therapy & 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 a global recession, a national reduction in healthcare spending is judged unlikely in any of the major economies, owing to the high political cost associated with such a plan of action. The medical sector can thus be seen as one of the safest long term growth markets for suppliers of semiconductors and the opportunities for growth for 32/64-bit MCUs/eMPUs and DSPs should be investigated accordingly.
Energy Efficiency & Conservation: Many of the most developed, and most polluting, countries have announced plans or legislation to decrease dependency on fossil fuels for energy production, with a corresponding increase in production using renewable sources. These building programs are extremely unlikely to be cut in the short term and look certain to offer further opportunities for growth for several decades to come. In addition, many multinational companies continue to show commitment to their green credentials in the form of energy conservation through the use of advanced motor control, such as AC variable speed drives. Advanced motor control reduces energy costs and can provide vital operational savings in the current climate of high oil and energy prices. Semicast judges motor control 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 of 32/64-bit MCUs/eMPUs and DSPs for much of the next decade.
Chip Cards & Payment Processing: 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 chip cards & payment processing is forecast to rise from around $25 billion in 2007 to over $40 billion in 2013, with chip cards, EPOS, cards readers and transaction terminals all leading growth for 32/64-bit MCUs/eMPUs and DSPs.
Communications Infrastructure: While spending on communications infrastructure collapsed in 2001 with the arrival of the “dotcom bust”, the sudden and dramatic drop in demand can largely be traced to a “bandwidth bubble” of over-investment in network capacity in the preceding years. In the period since, the industry has seen a more balanced pattern of investment, resulting from steadily rising demand for DSL/cable services in the home and vastly increased data traffic over cellular networks. In addition, the availability of feature rich content on internet sites such as Facebook and YouTube, the rising demand for TV over IP (TVoIP) services and increased teleworking and businesses run from home, will all contribute to rising data demand and a corresponding need for on-going investment in network capacity. While short term demand for 32/64-bit MCUs/eMPUs and DSPs in communications infrastructure is likely to soften, a market crash similar to that experienced in 2001 is judged highly unlikely.
Automotive Electronics: With oil prices having hit record highs during 2008, consumers are beginning to show changes in buying patterns, in particular from gas-hungry trucks and SUVs to smaller, more economical and environmentally friendly models such as the Toyota Prius. While new car sales are starting to soften in many regions as the impact of economic uncertainty starts to take effect on household spending, history would suggest that, owing to its long and comparatively complex supply chain, the automotive sector is more likely to record below trend medium term growth, as opposed to a substantial outright short term decline. In addition, with demand for 32/64-bit MCUs/eMPUs and DSPs rising rapidly in systems such as driver assistance, embedded navigation, airbags and instrument clusters, short term growth looks all but assured.
Although the market for 32/64-bit MCUs/eMPUs and DSPs accounts for only around 3% of the total semiconductor industry, with revenues over $8 billion and a growth rate approaching 10% it nevertheless provides a steady platform for the leading suppliers such as Freescale, Renesas and Texas Instruments. Colin Barnden, Semicast’s principal analyst and author of the study summed up “The broad application base and reliance on stable, if unspectacular, markets such as industrial, medical, automotive and communications infrastructure, looks set to make this one of the few bright spots in the semiconductor industry in the difficult times ahead.”