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Market trends and the electronics industry

Posted: 04 Jan 2011 ?? ?Print Version ?Bookmark and Share

Keywords:wafer fabs? IC design? semiconductor manufacturing?

Following the wildly successful launch of the iPad in 2010, 2011 saw many tablets being launched in attempts to challenge Apple's grip on the tablet market. Together with these tablets, increasingly powerful smartphones introduced in 2011 have also driven the incorporation of faster processors. The growth in these smart consumer products is expected to continue driving the demand for portability and computing power, which in turn, results in a growing demand for faster and more power efficient electronics in the coming year.

Global trends observed
The technology that enables these products is not only advancing in process complexity, but also in price; the cost to build and operate leading edge wafer fabs is becoming prohibitively expensive. It is estimated that only about 10 semiconductor companies have the financial ability to build new leading edge wafer fabs(IC Insights, Global Wafer Capacity, 2010). Process R&D is also becoming dearer, resulting in fewer sources of high-volume, leading-edge semiconductor fab manufacturing. Combined, these cost pressures thin out the availability of leading-edge semiconductor fab manufacturing, and ultimately squeeze the margins of IC design companies.

This increase in manufacturing cost runs up against the rise of the emerging, and largely still cost conscious, Asian markets. Today, Asia is the largest market for semiconductors, accounting for 54 percent of worldwide sales, up from 29 percent in 2001. It is also projected to be the fastest-growing market, with a 6.7 percent CAGR through 2015 (IC Insights, June 2011). This growth is expected to drive companies to see a greater need for a presence in Asia to achieve a faster time-to-market and swifter delivery; and to undertake R&D to create new products. It is telling that the demand for electronics in this region is no longer just potential: China has overtaken the U.S. to be the world's largest smartphone market by volume, as a result of a spike in more affordable Android-based handsets from Chinese companies like ZTE, and aggressive subsidies for higher-end models, like the iPhone (Strategy Analytics, 23 November 2011).

Consequences experienced by electronics companies
To improve margins and outlast their competitors in this increasingly costly and demanding environment, innovation and productivity have become the buzzwords. Already, the 2008 downturn has forced many electronics companies to relook their structures and processes, leaving behind leaner and more nimble operations. For the global semiconductor industry, despite getting off to a strong start in 2011, uncertainty had set in, resulting in an expected growth of just 1 percent in 2011 (Gartner, 19 December 2011). This could motivate more electronics companies to take a serious look at innovation and productivity.

While IC design is still the bread and butter of many semiconductor businesses, advanced packaging and more customized packaging solutions are capabilities that companies are beefing up on in order to ship increasingly multifunctional and often smaller SoCs. As the cost of IC design advanced nodes increases, companies are also looking at embedded systems to shorten the development cycle and increase the potential for hardware reuse. Together, these design trends point to a much more integrative approach to electronics that requires a broader spectrum of skills.


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