Are We Looking At The IoT Through Rose-Colored Glasses?

Steady single-digit growth that keeps older fabs busy is good for the entire industry.

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There’s been a lot of anticipation and promise associated with the explosive growth expected from the deployment of the Internet of Things. The prospect of 30 billion to 50 billion connected devices and all the associated electronics brings rosy visions of a return to double-digit semiconductor industry growth rates. Let’s take a look at the realities of the impending impact.

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MEMS, sensors (including image sensors), analog, and microcontroller products are usually at the forefront of the products that will benefit from IoT. There’s no question the unit growth for MEMS and sensors has exploded. Growing at more than 31% CAGR, sensor units increased from 6.5 billion units in 2010 to more than 25 billion in just five years. However, the analog market still dwarfs sensors. Analog grew by 31 billion units from 2010 to 2015, more than the total sensor units sold in 2015. In 2013 and 2014, analog units grew 15% and 10% respectively. Pretty impressive when the numbers are in the billions.

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But the sobering fact is that all the growth in sensors has made only a small impact on the overall semiconductor revenue picture. The average selling price for sensors has declined more than 15% CAGR over the past five years. Sensor revenues are only a fraction of the size of the memory or micrologic markets.

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From a manufacturing point of view, there is a very positive impact of the emergence of IoT — the revenue stream generated from the industry’s mature fabs. One of the main reasons why sensors have proliferated is the affordability factor. Most IoT applications require low-cost solutions. MEMS and sensors have shifted from 4- and 6-inch wafers to 8-inch wafers, resulting in a much more efficient use of silicon and thereby supporting the drop in ASPs. The return on investment remains attractive if the volumes can be maintained.

Semico remains optimistic that the IoT movement will have a positive impact on the industry. There is plenty of room for growth in the sensor market, along with the connectivity all these devices will require. We may not see a return to double-digit growth rates, but steady single-digit growth is still positive, and keeping our older fabs busy is healthy for the entire industry. Semico believes there’s no harm in looking at the IoT through rose-colored glasses because those glasses have led to revolutionary products that offer virtual and augmented reality.