Market Outlook For 2015

What’s changing and where the possible trouble spots will be next year and beyond.

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It’s always easier to look back at what happened in the past 12 months than to try to piece together a coherent picture for what could happen over the next year.

A good prediction relies on lots of data points, and even then it can be wrong. In a global industry, where geopolitical strife or pandemics can send markets tumbling or open up new ones, it’s not possible to account for all the unknowns. But there are some obvious areas that bear watching.

Global economics
On a macroeconomic level, the devaluation of the yen by the Bank of Japan last year will likely make Japanese chipmakers and device makers far more competitive than in the past. This is potentially good news for the Japanese exports. Japan’s economy has been mostly in a slump since the late 1990s, and this could help to revive it. But it also raises questions about how many new tools and IP and outside products Japan Inc. will buy, because they are now significantly more expensive.

The U.S. economy has rebounded, but Europe and China are sluggish at the moment. Whether they will recover in 2015 is anyone’s guess, but fundamentally these are well-managed economic regions with robust manufacturing and design infrastructures. That means recovery is a certainty. The only question is timing.

Automotive
One of the very bright spots in the semiconductor world is the automotive industry. Some 65.14 million cars were shipped in 2013. Each of those has an increasing number of semiconductors in them—everything from intelligent management of engine performance and efficiency to safety alerts.

There are so many sensors and SoCs going into cars these days—an estimated 10 to 15 SoCs per car—that it’s becoming hard to keep up with all the changes in each new model. This is good for the chip industry in the short run, but it could well push cars into more leasing than buying—something that eventually could create a glut of used cars.

New car sales typically rise during an uptick in the economy, while used car sales rise in a downturn, but there are some shifts underway. As more features become available—particularly safety-related features—more buyers may opt to hold off on purchases until the markets stabilize. And in economically stressed areas, such as Greece, people are opting to rent cars for a day rather than buy or lease, utilizing preferences stored on their smart phones. If that turns out to become a trend, it could have significant implications for this whole sector.

Mobility
There are reports that the high end of the smartphone market is saturated, and that the real future growth will come in the low end of the market. While that’s not entirely bad news—a two-year replacement cycle at the high end with at least a couple billion new opportunities downstream—there are some interesting possibilities even at the high end.

What would really make people want to replace their phones? Significantly better battery life and performance. Screen sizes have largely maxed out for people who like to keep phones in their pockets, but almost everyone complains about having to plug in their phone every night. The move to LPDDR4 in 2015, along with a possible push into stacked die either next year or in 2016, could have a big impact on battery life and performance. Couple that with more information about the efficiency of software apps running on those devices and upgrades will almost certainly happen—maybe even faster than a two-year cycle.

IoT
The Internet of Things is a wild card, in part because it isn’t well defined at the moment. But the ability to connect different markets, from consumer to health care to automotive is intriguing, to say the least. Rather than a well-defined strategy, though, the IoT is emerging as more of a general direction. It is one that will unfold over years, with lots of issues such as security and connectivity that will need to be resolved along the way.

The IoT will drive sales in a variety of markets, but how quickly depends upon one’s definition of the IoT. Smarter devices with more sensors will appear in areas such as personal health, automotive, and some consumer segments. And while driverless cars may not appear on the road in the foreseeable future, many new cars already are connected.

In industrial markets, the avoidance of downtime and improved efficiency are real metrics that can be quantified. It’s the same with office buildings where sensors can turn off lights and heat when no one is there, and even roll down shades or darken windows when the sun shines during summer months.

Conclusion
Taken as a whole, 2015 looks relatively bright from the vantage point of developments in 2014. It’s impossible to determine how all the factors will come together, of course, but there are enough bright spots for semiconductors in very large markets that there is optimism going into the next year. And that’s at least a good way to finish out the waning days of the current year.