But improvement will remain uneven due to market fragmentation.
To figure out what’s actually happening in the emerging Internet of Things (IoT) market, there’s no better place to look than MEMS and sensors, which are enabling this revolution in embedded intelligence in ever more places. The MEMS market is seeing continued steady growth, but components suppliers also are seeing brutal price declines and low margins, while the data analysis side captures 60% to 80% of the value. Innovation in better performance for established devices with wide application like microphones and acoustic filters is now driving growth.
Wearables likely won’t be a big driver for some time yet, and other new applications are an increasingly fragmented collection of specialized niches, according to industry leaders at the recent MEMS Executive Congress. Below, SEMI explores both the good and bad news news about the market at the leading edge of the IoT.
MEMS market will see continued steady growth, but from a highly fragmented variety of different devices built with different technologies. Bulk Acoustic Wave (BAW) filters and microphones are the new drivers of growth, as the market for the previous driver, inertial sensors, saturates and prices fall. Source: IHS
The Good News: Steady growth for existing MEMS and sensors going forward
Jérémie Bouchaud, director of MEMS and sensors at IHS, reported at the recent MEMS Executive Congress in Napa, Calif., that the long-term outlook for MEMS growth now looks better than it did last year. He’s upped his forecast to 7.6% CAGR for 2014 to 2019, boosting this year’s ~$10 billion market to close to ~$14 billion , largely driven by more than 13% CAGR in consumer markets. Jean Christophe Eloy, CEO and founder of Yole Développement, projected even healthier 12% to 13% market growth going forward, driven largely by the consumer market, which accounts for more than 60 percent of the total business.
The most promising sectors are those where innovations that improve performance keep up average selling prices. BAW filters are a major growth driver, with 20 BAW filters now in the iPhone 6, as the devices can meet the mobile demands for LTE and 5G that Surface Acoustic Wave (SAW) filters cannot. Continued performance improvement in MEMS microphones meet the demands for better sound quality for voice control systems like Siri, and for video recordings, with four mics now in the iPhone 6. Phone makers are looking for higher performance than current products, and new technologies are in the pipeline that could reach 70 to 80dB to maintain ASPs and double-digit growth going forward. MEMS scanner demand also has picked up again after the disappointment of pico projectors due to the adoption of 3D cameras in laptops, scanners in handsets for touch displays, and headlights and lidar (light detection and ranging) for automotive, according to IHS.
Eloy noted that infrared imaging sensors have come down in price to the extent they indicate an inflection to high growth next year in thermography and facial-recognition applications.
One unexpected development: Volkswagen’s diesel emissions issues will create perhaps 3% more demand for more sensors for exhaust treatment systems and to improve engine efficiency.
The Bad News: Severe price erosion means revenues flat to down this year
Demand for more mature sensors, particularly the inertial sensors that drove much of recent growth, is saturating, and declining prices mean that last year’s ~$1.8 billion market is facing a ~20 percent drop over the next several years, despite new applications and growing unit volumes, according to the IHS projections. The general slowdown in GP growth in China, will hurt, as it has driven a lot of handset and automotive components growth in recent years. Revenues for most of the major MEMS suppliers will be down in 2015. “Estimates for 2015 revenue are flat or among the top 10 companies, including at market leaders Bosch, TI, ST and HP, with growth only at the BAW suppliers, and InvenSense and Freescale,” said Bouchaud.
“MEMS is becoming a business of devices that cost a few tens of cents, turned out in millions of devices a day. The profit is not enough to be sustainable for many,” suggested Eloy. “All new devices use more software that needs to be developed with the hardware, as the value is the function, not the sensor.” That means more competition with processor suppliers over this value.
Don’t look for big growth in wearables over the next five years either. “Compared to the 11 billion sensors in phones, the few hundred thousand in wearables will be noise until 2020-2025,” asserted Bouchaud.
Maciej Kranz, vice president of the Corporate Technology Group at Cisco systems, agreed. He said all of the money in IoT so far is in business-to-business applications, citing incremental improvements from applications in manufacturing, oil, transportation, utilities and cities. “There’s a bigger opportunity in business to consumer, but we’re not there yet.”
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