Electronic Design

Megatrends: The Global Factor

Wireless dominates. But what other technologies and issues will have the greatest impact on our industry over the next few years?

The word megatrends isn't listed in most dictionaries. But we usually know them when we see them, especially in the electronics industry. Predicting what technologies and issues are most likely to dominate the industry is a trick business. But it's the stuff CEOs, magazine editors, and market research organizations think about every day, particularly when it comes to the market and developing new products.

Or Anything Wireless
"Over the next several years, wireless with become massive in its pervasiveness," says Phil Asmundson, national managing partner for Deloitte & Touche US LLP's technology, Media & Telecommunications industry consulting practice.

"Wireless proliferation will impact virtually every aspect of our lives and will evolve well beyond mobile phones and PDAs to other devices, services, channels, and content," Asmundson says. At this connectivity becomes ubiquitous, we will face a range of threats and issues. But wireless will clearly change how we work, how we play, how we interact, how we learn, how we maintain our health, and, ultimately, how we live."

Where does that leave the Internet in the scheme of things? ComScore Networks conducted a survey in which it attempted to give a worldwide perspective on what it sees as a traditionally U.S.-centric Internet user measurement. It found that 152 million people in the United States and 22% of the world's population are Web users.

By contrast, just over 168 million users reside in four Asian countries—China, Japan, India, and Korea, or nearly 25% of the total online population. Worldwide, ComScore estimates 694 million people, age 15 and older, use the Internet. Those are pretty good numbers to hang a lot of applications on to.

Looking Ahead
The opportunities for new and emerging technologies, applications, and markets just keep growing. Consumers are spending at a rate that could easily surpass $125 billion this year. And the much-hyped digital home, pushed and prodded for years by the industry, home builders, and developers, may finally become a major trend.

At least 20% of broadband subscribers across the U.S. and Europe now use Wi-Fi to share their Internet connection between PCs and other devices, according to a survey by Strategy Analytics, a market research firm. The survey also reveals that 7% of all households now have a wireless network. In addition, U.S. sales of IP-enabled devices climbed by more than 500% in 2005, as consumers bought an estimated 16 million IP-enabled game consoles, entertainment PCs, and digital video recorders.

Consumer technology vendors who ignore the fundamental industry enabled devices will be left behind," says Peter King, home devices service at Strategy Analytics. King indicates that 7% of the digital consumer-electronics enabled in 2005 (Fig. 1). That's not a huge number, but it 2004, and he expects the trend to continue this year as add connectivity to flat-panel TVs, DVD players, digital-cell phones.

In another sign of the the strength within the consumer electronics sector, company Park Associates predicts that by 2010, worldwide-portable MP3 player shipments will total 106 million worldwide sales of portable multimedia players will jump to 21 million units.

The Federal Communications Commission-mandated deadline requiring analog to digital TV broadcasting is expected to create-S. pay TV providers. Millions of households served broadcasts are expected to finally sign up for multichannel-cable, satellite, and telecom companies by the February 2009 switch-off date.

Strategy Analytics expects the number of U.S. households using some form of digital TV to climb from 57 million today to 77 million by the end of 2008, just before the deadline. Moreover, penetration of digital service will grow from less than half of all cable customers today to nearly three-quarters by 2010.

The Consumer Electronics Association figures that 8.9 million HDTV sets were shipped last year, up from 6.1 million sets in 2004. As a result, CEA analysts estimate that 18 million to 19 million high-definition TV sets now sit in U.S. homes, about twice as many as a year ago.

This is very good news for chip manufacturers. Digital set-top box sales will boost both semiconductor unit sales and revenue, and total available markets (TAMs) will continue to increase at double-digit compound annual growth rates (CAGR). Semico Research forecasts the chip market to grow at a CAGR of 16.2% between 2004 and 2009, with units shipped increasing from 46 million to 97.4 million over the same period, largely on the back of consumer electronics.

The demand for digital living could finally drive the growth of home automation, some wired but most of it wireless, further extending the integration of portable devices into the home. Apple Computer is working with vendors so that consumers will be able to access Apple's iPod virtually anywhere in the home from home theaters. Eventually, consumers will have seamless access to information and personal entertainment from anywhere, inside or outside the home.

Forrester Research already sees this happening. At the end of 2005, 8% of U.S. households that already subscribe to mobile services dropped their landline phone service—up 3% from the end of 2004. Forrester projects that more users in the 35-44 age group will go completely wireless in the years to come.

New Designs Go Green
Meanwhile, companies are still trying to figure out how to comply with the emerging European Union-driven environmental directives. The Restrictions on Hazardous Substances (RoHS) requires industry OEMs and other companies to remove six substances, including lead and mercury, from their products by July 1. Also, the Waste Electrical and Electronic Equipment (WEEE) directive makes manufacturers financially responsible for collecting and recycling used electronics.

These mandates will continue to challenge even the biggest industry companies. It's already forced them to redesign many of their products. But getting the lead out with RoHS and establishing a takeback system to recycle products with WEEE are only the beginning. Further legislation will eventually require the entire industry to design its products virtually from scratch, with the environment in mind.

The process, generally called ecodesign, could create a whole new design culture in the industry. However, some suppliers worry that changes in the supply chain, which require OEMs to work much more closely with their parts and materials suppliers, could lead to a paring down of vendor sources.

Topping many companies' list of priorities is evaluating their current processes and looking at new materials, new process technologies, innovative circuit and micro architecture designs, novel packaging materials and techniques, and power efficiency solutions that haven't been previously considered. Much of this is old news to a number of larger companies, some of which have been battling design-for-engineering (DFE) issues since the early 1990s.

Hewlett-Packard started its DFE program in 1992 with three priorities—energy efficiency, materials innovation, and design for recyclability. The HP program presents clear design guidelines and checklists for assessing a product's recyclability. It also includes a tool developed by HP in 2004 that assists its product designers worldwide in assessing product recyclability at the design stage. It can help track product-line improvements, too.

The tool is now integrated into HP's DFE standards. Large or small, other companies have developed or are developing similar programs, mainly because they've got to meet the new legislative initiatives. Technology Forecasters Inc., a market research specialist that conducts environmental workshops, believes WEEE could be a good thing for the industry.

"The WEEE directive states that where the generation of waste cannot be avoided, it should be reused or recovered for its material or energy," says Pamela Gordon, TFI's president. "Our research indicates that many OEMs are passing over 'reused' and focusing on 'recycling' and are thereby missing opportunities for increased profits for their companies."

Location Services Find Success
The Pentagon owned and operated Global Positioning System (GPS) has been around since the 1950s. But advances in the system, such as GPS on a chip, are turning cell phones, Wi-Fi-equipped notebooks, and enterprise location-enabled applications into a major market opportunity for location-based equipment makers and services. It also has become a huge market for new and aftermarket automotive and truck manufacturers.

The GPS system itself is continuously being upgraded. Russia has had its own 24-satellite system for years, although it's not clear how many of the satellites are operational at any one time. And, the European Union is scheduled to launch its 30-satellite multibillion-euro satellite navigation system, called Galileo, into service in 2008.

Primary research by Lucent Technologies suggests that U.S. wireless carriers have a potential market for location technologies of more than 60 million customers. More than half of those expressing a high interest in a system that alerts users when friends, family, or points of interest are in their vicinity.

Most current-generation mobile phones are tracking-enabled. Longhaul trucking and rental-car companies track their vehicles. Miniaturized devices now enable parents to monitor the movement of their children. Health-care providers can now easily monitor their patients.

"Managing patient flow is one of the hot topics for any hospital," says C. Peter Waegemann, CEO of the Medical Records Institute, which is working with Patient Care Technology Systems and Parco Wireless to demonstrate wireless location and tracking technologies.

Several municipalities and states, looking for inexpensive ways to monitor traffic, also are turning to cell phones, using signals that cell towers send to phones as a way to extrapolate highway speeds and traffic bottlenecks. The cell phones needn't be in use. They just have to be on.

Wi-Fi may be the next step in driving location tracking applications. Wi-Fi tags are used in Wi-Fi Real-Time Location Systems (RTLS) that take advantage of Wi-FI access points to locate devices with embedded Wi-Fi or those with external Wi-Fi tags. This is admittedly a nascent application for Wi-Fi, but In-Stat expects Wi-Fi asset tags to reach almost 2 million units in 2010 (Fig. 2).

Wi-Fi-based RTLS has two advantages: It can leverage standard Wi-Fi infrastructure for location tracking (instead of purchasing a standalone location device), and it can track any device with embedded Wi-Fi, including laptops, scanners, and phones. In-Stat also has high expectations for more highly integrated and more functional Wi-Fi tag chip sets. Cisco has already partnered with several Wi-Fi RTLS vendors. Other network system providers are expected to follow.

Depending largely on the cellular operators' interest, In-Stat expects the U.S. location-services business market to double to 1.1 million subscribed devices by the end of 2010.

"The forecast for enterprise location-enabled applications using handsets depends on how carriers and applications vendors sort out how they will market these applications and how to structure the billing relationship," says Allyn Hall, a director with In-Stat.

Vehicle-mounted devices likely will continue as the largest market for business location services, while In-Stat sees cell phones equipped with GPS chip sets as an emerging market.

Emerging Markets Will Fill Market Gaps
PCs and the Internet have shown little growth in so-called mature markets over the past several months. Yet economies of scale, lower material costs, and more highly integrated chip designs have created new opportunities in emerging global markets—India, Indonesia, Turkey, Russia, South Africa, Egypt, the Philippines, and certain regions of China.

The Telecommunications Industry Association (TIA) sees "enormous potential" for expansion in these areas, particularly in China and India. It expects these two countries alone to add more than 400 million wireless subscribers during the next four years (Fig. 3).

Motorola and Nokia are pitching cell phones priced in the $30 and $40 range in several of these markets. Motorola believes these and perhaps other regions of the world could add more than 100 million new mobile users a year globally over the next few years. To help make this happen, Motorola created an Emerging Markets Handset program and formed a working relationship with the GSM Association (GSMA) to develop a family of low-cost mobile products.

Nokia is being just as aggressive. Jorma Ollila, Nokia's chairman and CEO, recently credited emerging markets for helping drive demand for the company's products. The company expects approximately 80% of the next billion subscribers to come from "emerging market" regions, potentially boosting the global mobile subscriber base to 3 billion cell phones by the end of 2008.

Market research firm Gartner says that while global desk-based PC shipments to mature markets declined 8.6%, desktop PC shipments to emerging markets increased 19.5% in 2005, with a significant increase of PC shipments to the Middle East and Africa.

This shift in global growth patterns hasn't escaped Intel, which has grappled with slowing PC growth in the U.S., Europe, and Japan. In May, Intel announced plans to spend $1 billion to promote Internet use and computer training in developing countries. The program, dubbed "World Ahead," is designed to bring high-speed wireless Internet access to a billion people who can't get online, while training 10 million teachers to use technology in education.

Declining materials costs and simpler designs that produce lightly featured cell phones have been catalysts in making a dent in these markets, allowing the average mobile-phone price to drop by more than 70% from 1999 to 2004. Nokia and Motorola already announced plans to use Texas Instruments' 90-nm "single-chip solution" in its sub-$40 phones. Qualcomm also demonstrated a cell phone priced at $40.

These are right on track, according to IC Insights. In 2005, the market research firm says the bill-of-materials (BOM) for many low-end cell phones dropped to $25, down from about $39 in 2005.

Bang & Olufsen, meanwhile, known best for its high-style, highend products, also sees a niche in the market. It teamed up with Samsung Electronics to produce a line of high-end but "easy-to-use" mobile phones for sale through Bang & Olufsen's stores and through Samsung's distribution partners in Europe, Russia, and the Ukraine.

"Total global handset shipment growth of 31% annually, driven largely by emerging markets such as India, is at its highest rate for almost two years," says Neil Mawston, associate director of the wireless device strategies service at Strategy Analytics, a market research and consulting firm. "We expect strong demand to continue throughout the coming months."

The Massachusetts Institute of Technology's Media Lab also joined the emerging markets march, forging industry partnerships with several companies to produce and market $100 laptop computers for children in developing countries. The 500-MHz models will run what Nicholas Negroponte, the lab's chairman and cofounder, calls a "skinny version" of the open-source Linux operating system.

Negroponte is working with the ministries of education of these countries in hopes of getting "very large numbers," with initial orders limited to a minimum of a million units. The laptops are slated for shipment in volume beginning later this year or early 2007.

People And Places
Another emerging megatrend is about people—where they're educated and where they work. The big question now is if the U.S. is still the center of innovation in the world or if educational, staffing, and other measurable trends suggest otherwise.

One of the arguments often made for sending design work or manufacturing offshore is that engineers in countries like China and India are paid less than U.S. engineers. But according to IEEE-USA President Ralph W. Wyndrum Jr., a study conducted by World Bank International indicates that engineers in those and other countries can afford to be paid less because they have purchasing power parity with U.S engineers, even though U.S. engineers may make four times as much or more than engineers in these countries (Fig. 4).

Another argument for hiring engineers with H-1B visa status, and for expanding the H-1B program, is that there's a shortage of high-tech workers in the U.S.

"IEEE-USA believes that there are plenty of qualified U.S. citizens to fill most of the hightech openings in this country," says Wyndrum. "Often times, companies prefer to hire H-1B visa holders because they tend to pay them lower wages and require them to work longer hours. We have a report based on government data that shows H-1B workers in computer occupations are paid about $13,000 less than the market wage."

Wyndrum also quotes a study from Duke University indicating that the definition of engineering graduates in India and China is "fuzzy" and that the graduation numbers in these countries may be "wildly exaggerated." According to the study, statistics seem to include anybody who has studied anything technical.

But the recent expansion of growth in the number of foreign students applying to graduate schools in the U.S., as well as calls for expanding the H-1B visa program, worries IEEE-USA and its working engineer members.

According to a survey by the Council of Graduate Schools, which represents more than 450 universities, the number of foreign students applying to graduate programs in American universities during this academic year rose 11% from last year. This reverses a two-year decline that followed the Sept. 11, 2001 terrorist attacks.

Absolute numbers aren't readily available, because not all of the council's schools responded to the survey. But the council suggests that after the attacks in 2001, foreign students, particularly those in technical fields, had problems obtaining visas. Recent changes in government policies have made it easier to obtain H-1B visas.

Congress is now considering increasing the annual H-1B visa cap by at least 50,000 without—as IEEE-USA puts it—strengthening safeguards to protect foreign and domestic technology workers. As Wyndrum succinctly stated in a March 15 letter to the U.S. Senate Judiciary Committee, "As the administration concluded last year, the program has major flaws that leave it vulnerable to fraud and abuse."

IEEE-USA's primary concern is a proposal to increase the H-1B visa cap from 65,000 to 115,000 and include an automatic escalator mechanism for future years, when current legislative provisions would expand permanent admissions of skilled foreign professionals. Among the proposals is a new student visa that leads to a green card for foreign nationals pursuing advanced degrees in science, technology, engineering, and mathematics at U.S. colleges.

Another proposal would expand employment-based immigrant admissions visas from 140,000 to 290,000. It also would exclude immediate family members from the limit, recapture unused immigrant visas from prior years, and exempt advanced-degree professionals from the cap.

IEEE-USA's position is that the permanent immigration of skilled engineers is better for the country's capacity to innovate and meet hightech workforce demands than another expansion of what it believes is a badly broken temporary H-1B worker program.

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