The 2010 Data Wave: How smart solutions will drive semi growth


Please refer to this MarketWatch Quarterly's Sector Brief, "Energy Efficiency is a New Growth Sector for Semi," for a more detailed consideration of the economic and industry based impetus behind this 2010 forecast.

The smart grid has been called the “largest interconnected machine on Earth," George Arnold, the national coordinator for smart grid interoperability. Given all that makes up the “smart grid” that statement is quite accurate. Starting with technology that enables two-way communication between electric meters, home networks, local networks and wide area networks, the “smart grid” is a platform for connecting residential, commercial and industrial hardware. The benefit of this new network is the data that it can collect and distribute; data which enable active and pro-active energy conservation. For the electronics industry, the benefit of the “smart grid” is the significant growth in network devices and related equipment in addition to the numerous electronics products to be equipped with network connectivity, as well as significant increases in servers and data storage devices.

The Smart Wave: Why and what?
At the heart of the cresting solutions in energy efficiency and power management are data, and lots of it. Consumers are able to both directly control their energy consumption and save money by reducing their electricity bills; with this capability, the dark age of elusive granular data on energy consumption behaviors is over. Data retrieved through new, 'smart' devices and Advanced Metering Infrastructure (AMI), bi-directional networks, enable the monitoring and manipulation of energy consumption in and by buildings of all types. This monitoring and management translates into energy savings at utility scale levels which means a tremendous ROI for the consumers and the country engaging in smart energy solutions (smart grids, smart meters, energy efficiency at all levels).

Uncertain as to the reality of this ROI on the radar of those holding the purse strings? How about the United States' investment as a gauge: US $8 billion in 2009 (comprised of public and private funds combined for ARRA based smart grid projects). Most of these funded projects have a short window of one to three years to be implemented; in other words, the momentum for the drivers of 'smart' products and AMI is backed by public and private sector financial investments.

Already there is increasing demand seen in the consumer and commercial market for 'smart homes' filled with 'smart appliances' and 'smart buildings' with 'smart energy consumption' capabilities. Residential and commercial consumers are seeking systems that can be operated remotely via a smart phone or programmable devices that are able to react to energy consumption models dictated by the consumer.

Data and network improvements are the drivers
AMI is the 2.0 version of Automatic Meter Reading (AMR), the traditional analog utility metering system. AMI is more than just metering, it is a bi-directional communication network that collects data from an advanced digital ("smart") meter in real-time and stores it on hourly and daily intervals for 40 days on the meter itself as well as relaying that data to both utility companies and to the consumer's energy monitoring system accessed through their digital meter and their computer (sent to the computer through their home area network (HAN)).

These data are critical to consumers of all types (residential, commercial, industrial) and to utilities because these data allow for immediate manipulation of energy consumption either automatically (through programs governed by the energy monitoring system on the HAN computers or handheld Mobile Internet Devices (MIDs)) or through agreement with the utility company who can remotely adjust energy use during peak periods.

While this may seem to be rather mundane energy efficiency information, consider how heavily this AMI relies on computers, local and wide area networks (LAN and WAN), MIDs, advanced digital meters with RF and bi-directional communication capabilities, data storage, data manipulation, and similar electronic devices with semiconductor components dedicated to these tasks. That is a considerable market and it is new.

Then consider the amount of data as one multiplies this functionality from one location to urban centers, regions and countries. That is a significant amount of data that require storage, manipulation, sharing, and the devices that enable the original logging and transmission of these data from the appliances and energy-using devices now governable by the local advanced meter on up the chain to the utilities and to an entire power grid. That is the Advanced Metering Infrastructure, the smart grid. That is the core of the next wave for semi.

The devices and their components: What, where and how?
There are multiple markets, social and economic reasons propelling technological change to electronics devices and their component parts, down to the chips themselves. The devices and components will most likely be driven by features and capabilities demanded by a consumer hungry for more 'on' time with their mobile device, and by OEMs looking to differentiate through improved weight, reduced energy consumption, power management improvements, and/or environmental footprint (a 2012 mandated disclosure in the EU) among other drivers. Considering all of the above factors thus far, these market movements are what support significant sales forecasts of semiconductors to this emerging smart energy market.

Looking at the devices and components themselves, new technologies related to AMI will drive improvements and new features for: home appliances, TVs, smartphones and computing (portable and desktop), network equipment, servers, digital meters, interactive thermostats (for homes without internet devices), automotive (from improved efficiency through new hybrid-electric vehicles), and larger-scale utility solutions for smart grid deployments (e.g., IBM, Microsoft, Google, and GE, among other titans, are all actively engaged in the software and firmware aspects of smart grid support and connectivity).

Following we'll briefly consider two sectors that are poised to see important changes and growth as a direct result of the AMI and HAN proliferation.

Home Appliances, TVs and Monitors
Since 2H09 the forecast for 2010 for home appliances has been upbeat. While 2008-09 was a rough period for this market sector, semiconductor revenue experienced declines between 15-20% as a result of the market sector slide. With 2010 though, the semiconductor content per appliance is set to increase due to increased capabilities and technological sophistication of the appliances, according to research analysts Jason dePreaux of IMS Research, as cited by DigiTimes on 8/21/09.

Improved capabilities of home appliances that directly affect the semiconductor BOM is a direct result of increased energy efficiency standards and consumer demands for improved device controls, all coming down to the need for more advanced microcontrollers, as noted by DigiTimes among many other market reports. Furthermore, as EETimes underscored on 12/14/2010, the Association of Home Appliance Manufacturers (AHAM) are keenly aware of this trend and in support of providing consumers with the control over their appliances through connectivity to the smart grid and standard protocol development necessary to realize functionality and interoperability.

With the support of AHAM as well as those such as IBM, the 'smart home' is here and with iSuppli's forecast of 1.2 billion connected CE devices in use by 2013, the network infrastructure is maturing and AMI is something that will be realized and will be interactive for the consumer through myriad electronic devices.

TVs and monitors are high on the list of devices in the 'smart home' that will increase in the number and improved capabilities of semiconductor components. Firstly because of the need for product differentiation through new features by OEMs, secondly because of consumer demand for added features such as sound and light sensors to automatically regulate controls, and thirdly because of new discussions and likely legislation around Energy Star ratings for Active Mode TV power consumption. Presently the Energy Star ratings for LCD TVs are for Stand-By only, but the LCD TV Association is pushing for the move for "GreenTV" which features sensors that adjust brightness of the TV screen (and/or monitor) to ambient light – again more semiconductor components necessary for all of these features.

Network Equipment
With the proliferation of AMDs and the smart grid, reports continue to pop up of numerous network equipment makers who are moving into the "smart grid devices" market, such as reported on 12/15/2009 and 12/16/2009 in DigiTimes, as well as GreenTech Media's report on SilverSpring.

With the combination of commercial sales for upgrading equipment (computing, network and servers) this cycle having postponed such capital expenditures (CAPEX) since 2007 due to the murky financial situation globally, and the opportunity to also include opportunities for businesses to improve their carbon footprint and 'green business goals' by reducing energy consumption through AMI, the forecast for network revenue is averaging 10% across companies surveyed. The likelihood for increased growth beyond 2H10 is strong as well due to the robustness of the market drivers and business sales strength.

On a broader scale, within the industry itself, the Green Touch Consortium has received some important support from leading industrial labs, service providers, and academic institutions worldwide. Looking at the increased use and proliferation of networks and the related energy costs will also impact the technology behind network equipment and related devices. It will be interesting to monitor these activities and the impact on network equipment components.

Smart growth is global, widespread and deep
What is most compelling about the growth forecasts associated with the 'smart' energy market is the breadth and depth across all regions that are positively impacted. Opportunities also extend to the following markets where innovations continue and new components and devices will add to the enriched supply of new components for products for a wide array of sectors and markets:

It looks like 2010 will certainly be the start of not just a new year, but a new decade in trends that hold significant promise and growth for the semiconductor industry.

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