As 2010 closes and 2011 begins, so come the latest forecasts for industry performance and expectations for the year ahead. Each forecaster’s processes may be the same from year to year, but their predictions can set the pace for investment in R&D, capacity advertising, marketing communications budgets, and more.
Last year, IC Insights predicted 15% growth for the semiconductor market. In 2010, worldwide gross domestic product (GDP) was $57.1 trillion, resulting in worldwide electronic system production of $1237 billion and a semiconductor market of $313 billion (a 32% growth rate). In its McClean Report for 2011, IC Insights expects worldwide electronic systems to grow 9%, with the semiconductor market also continuing to climb, albeit at a reduced rate of 10% (Fig. 1).
“If you look at the long-term average for worldwide electronic systems sales, it’s about 6%,” says Bill McClean, president of IC Insights. “So 9% is still above average. That’s actually a very good year if it comes in at 9%.”
McClean is unusually optimistic for 2011. “We are the highest out there. We are the highest of any major forecaster,” he says.
However, the spread of the forecasts ranges between 5 to 10%, so it’s rather narrow. The optimism is based on several factors.
According to IC Insights, the semiconductor content in electronic systems reached a new level in 2010, coming in at 25.4%. That’s expected to increase to 27.8% over the next five years, with pricing of ICs remaining rather firm during the forecast period.
In 2010, China surpassed Japan’s GDP, becoming the second largest country in the worldwide economy. In 2011, it will outpace all other major regions with a 9.2% growth rate. When coupled with India and other emerging countries, emerging market growth will register 6.5%.
So, was 2010 a “good” year? According to McClean, the 2010 increase of $75 billion was the biggest increase in the history of the semiconductor market.
Forecast assumptions, in addition to those already stated, include neutral effect of foreign currency on the U.S. dollar exchange rate and no major terrorist attacks or wars.
MARKET SEGMENT GROWTH
Personal computers and cell phones continue to be the largest drivers of semiconductor content. Last year’s booming 18% increase in the PC market will fall off in 2011.Still, 12% growth is expected with upwards of 394 million units. The rapidly growing area of netbooks is included in the PC shipments.
Cell-phone unit demand will rise 9% in 2011 to 1550 million handsets, following on 2010’s 13% growth rate. The smartphone’s share of the overall cell-phone market will jump 25% in 2011, up from 19% in 2010. Cell-phone subscriptions went above 5 billion in 2010.
“If you Google how many people in the world wear shoes, there’s four-and-a-half billion people in the world that wear shoes,” says McClean, conveying the significance of cell-phone technology.
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Last year was a record setting year for many IC product categories, according to Brian Matas, vice president, Market Research, IC Insights. For example, DRAM grew at an amazing rate of 76%.
Outside of telecom special-purpose logic/MPR, ROM, and EPROM, all of the remaining 25 IC product categories experienced double-digit growth in 2010. For 2011, Matas says a lot of good but modest growth rates can be expected. Still, a number of IC market segments (Fig. 2) should grow at or above the 10% rate forecast for 2011.
Expected growth is lead by data conversion and automotive application-specific analog. “Automotive, even last year, did pretty well,” says Matas. “Automotive application-specific analog, automotive special-purpose logic, and a lot of microcontrollers are used in automobiles as well. So we saw a strong rebound in automotive sales in the U.S and across the world, too.” When examining total sales for analog devices, automotive has the highest predicted growth rate (10.4%).
However, the convergence of technology in different media platforms, from cell phone to tablets or portable computers, is perhaps the most compelling factor for continued IC growth. For example, functions on all of these products include music, call/text, e-mail, headphone, TV service, and more.
“We see that trend as one of the big drivers in the industry for a lot of these different products,” says Matas.
Another key factor is Internet accessibility through more products. Matas noted that Paul Otellini, president and CEO of Intel, said during a recent fourth quarter conference call that another 1 billion people will be added to the online community by 2015, which will instigate sales of an estimated 15 billion devices. That’s three times the amount that exists today.
The explosion in Internet connectivity, from smartphones to tablet PCs to cars, has a dual effect. It will drive increasing semiconductor content in these products, as well as in the high-end servers that must handle the proliferation of connectivity and web traffic.
Though computers are still the primary user of memory components, the convergence of various features into new wireless handheld systems also has created significant demand for memory. The typical DRAM and flash-memory content in different types of PCs versus that of more-advanced cell phones shows some remarkable numbers (see the table). With a significantly higher number of smartphones and enhanced cell phones, the total content easily exceeds the total of netbooks and tablet PCs—even though the memory content is less in each phone.
IC Insights expects that from 2009 to 2014, tablet systems will increase at a 131% compound annual growth rate (CAGR), netbooks at 7%, notebooks at 14%, and desktops at 2% from their 2010 levels of 14, 31, 155, and 151 million units, respectively.
TECHNOLOGY CHALLENGES LOOM
From a technology perspective, Moore’s Law (the doubling of the transistors on a high-end IC every two years) remains the economic engine that drives the IC industry. It results in reduced cost per function and more functions per device or generation.
“However, for the past several years, the ability to increase the functionality and capabilities on our ICs is getting very, very difficult,” says Trevor Yancey, vice president of technology at IC Insights. “We are reaching some limitations as far as how small we can make the transistors and how big the ICs can be, which is causing the ability to add functionality to our devices to slow.”
Beyond the fundamental physical limits to transistor scaling, manufacturers must confront major issues such as excessive power-consumption problems, vanishing noise margins due to lower operating voltages, and the need for novel circuit architectures. In fact, hurdles posed by shrinking geometries have caused major process technology innovations (Fig. 3) to pile up.
At the same time, product design and life cycles are shorter than ever, and there’s a considerable increase in interactions between design and process technologies. Adding to those headaches is the fact that most companies simply can’t lay out the money needed to build an advanced 300-mm wafer fab. Nevertheless, these future issues will not inhibit 2011 from being a pretty good year.