Smith Market Blog

Internet of Things to Boost IC Market and CE Sales


As we move into the second quarter of the year (2Q14), we've already been inundated with a vast array of devices, systems, solutions, and technology dreams on display at CES, MWC, Detroit Auto Show, Geneva Motor Show, and most recently SXSW, as we've reported on.

The devices are many, particularly the hottest new trend of wearables that are quickly evolving to better meet the feature requirements users want and to provide fashionable designs that have mostly been mostly lacking so far. The fact that our industry has a strong follow-up device trend, "wearables," on the heels of the smartphone and tablet boom is not only important for sales and volume numbers, but it is important for innovative design and the next positive disruptive phase of growth for the industry as a whole.

IC numbers strong for 2014

IC Insights recently posted their 2014 IC Market forecast for personal computing (PC) systems. The forecast is solid with a compound annual growth rate (CAGR) of 2.7% for the 2012-2017 period:

[…] the IC market for total personal computing systems is forecast to increase 6% to $77.7 billion in 2014 and climb another 6% in 2015 to $82.1 billion, which will be just shy of the record-high $82.3 billion set in 2010, according to the 2014 edition of IC Insights' IC Market Drivers—A Study of Emerging and Major End-Use Applications Fueling Demand for Integrated Circuits. A new record high is forecast to be set in 2016, when sales reach $88.0 billion. Between 2012 and 2017, personal computing IC sales are projected to rise by a CAGR of 2.7%, totaling $85.0 billion in the final year of the forecast […].

The IC Insights research shows sustainable and steady growth from 2013 to 2014 for Standard PC ICs, ($1.5 Billion), Tablet ICs ($2.9B), and Internet Cloud System ICs which includes netbooks ($0.14B). This trend is forecasted to continue through 2016 based on the IC Insights' data. The trend clearly shows the movement from PC to Tablet and onward to Internet/Cloud Systems, which will support the IoT movement:

IC Insights is forecasting a 20% increase in tablet integrated circuit sales in 2014 to $17.6 billion, followed by 10% growth in 2015 to $19.5 billion. Between 2012 and 2017, tablet IC sales are expected to grow by a CAGR of 15.3% to $21.8 billion in the final year of the forecast. The Internet/cloud systems segment is expected to generate $558 million in IC sales in 2014, which will be a 37% increase from about $408 million in 2013. IC sales for Internet/cloud computing systems are projected to grow by a CAGR of 28.7% in the forecast period, reaching $1.1 billion in 2017.

Growth supported by fab spending data

Supporting these forecasts and trends in device and component growth are the data around fab equipment spending (whether for new or for installed capacity). These data were recently released by SEMI and forecast a 20-30% spending increase for fab equipment in 2014:

The release today of the SEMI World Fab Forecast update reveals a 20 to 30 percent projected increase in semiconductor fab equipment spending in 2014. […]

According to the SEMI data, double-digit fab equipment spending growth will occur in almost all industry segments.  The segment showing the largest increase is expected to be MPU, followed by Memory.  Analog, Logic and MEMS will share third place with about 30 percent growth each — off of a small spending base in 2013.  The Foundry segment spending is expected to grow by 15 percent.

The SEMI World Fab Forecast report shows an increase in DRAM related projects equipping, thus an increase in DRAM related equipment spending from about 7 percent growth in 2013 to 30 percent in 2014. Overall DRAM installed capacity is expected to remain flat (0 percent) in 2014, following a contraction in 2013.  […]

Across the entire industry, installed capacity (without Discretes) grew by only 2 percent in 2013; this is expected to creep up to 3 percent growth in 2014 and in the 3-5 percent range in 2015.

SEMI's data, in combination with the recently released positive sales data for 2013 and for January 2014 from SIA strongly support the overall 2014+ positive forecasts. These forecasts could even be driven higher should the presently wide variety of markets for wearable devices hit home with consumers and see the demand that is anticipated.

IoT bolsters connected device growth

Importantly, many of the wearable devices hold a tight relationship with smartphone and tablets and that connection of devices offers an exciting new growth opportunity for our industry. Typically, device booms have cannibalized sales of other devices, such as we have seen with tablet PCs and traditional laptop PCs. The IoT relationship between wearables and a 'base' device could not boost sales as lower-priced smart devices are not cast aside but rather see additional demand support so that wearables and related applications on smart devices can be adopted and accessed. With the introduction and now expansion of 64-bit processing/mobile chips for mobile devices, additional computing capabilities for the expanding realm of IoT devices is developing.

This week's annual SXSW Interactive certainly underscored the exciting array of innovations for wearables, such as the Asian megacities solution presented by one designer for a facemask sensor with geomapping to report on air quality levels for locations to be visited on that day. As Smith's Mark Bollinger, Vice President of Marketing, reported from SXSW, "The real theme is that wearables are about more than footstep counting. Adding Big Data to wearables will have a tremendous impact on the industry and the direction of growth to come."

Lisa Ann Cairns, Ph.D.
Written on Friday, 14 March 2014 12:10 by Lisa Ann Cairns, Ph.D.

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