Crisis Speeds Change in the MEMS Industry

Jérémie Bouchaud, Principal Analyst, MEMS, iSuppli

For the first time in its 20-year commercial history, the MEMS industry is experiencing a downturn. In 2007, the market for MEMS sensors reached a historical peak with close to $6.7 billion worth of devices sold. By the end of 2009, $1 billion will have been wiped off of the market, with consequences that ripple along the supply chain like a Tsunami.

But even in the grim light of the current recession, the good news is that MEMS the market has always been sufficiently broad and diverse to continually reinvent itself. This is happening again now with new products picking up the slack from those products that are struggling. Indeed the market will pick up with renewed vigor again in 2010, and even exceeding the level it attained in 2007 by 2011 (see Figure 1). The market will hit its stride during this period managing a Compound Annual Growth Rate (CAGR) of 10% from 2009 through 2013.

Market Development by Application Fields

So what are the local hot spots powering this shift in the MEMS application segment? And how has the crisis influenced these shifts? The MEMS market today is made up of four major sectors:

• Data processing i.e. printing
• Automotive
• Mobile handsets and consumer electronics
• Industry and process control

Smaller areas (< $500 million) consist of medical applications and aerospace and defense (Figure 1). By 2013, the Top-4 application sectors will be more equally shared, although the ultimate market opportunity is for consumer and mobile applications.

The market for mobile phones and consumer electronics together is the fastest growth area for MEMS today with a CAGR of 16.5% expected from 2008 to 2013, overtaking automotive sensor sales for the first time in 2010. By 2013, this area will be the largest, accounting for $2.5 billion or 30% of total MEMS market, compared to 19% of the MEMS market in 2008. Products driving this are low g accelerometers for cell phones, gaming and laptops, followed by gyroscopes for gaming and Digital Still Cameras (DSCs), and microphones.

Safety is a Key Factor

Despite the current troublesome situation in the automotive markets, overall for MEMS they appear relatively stable over the long term. After a contraction in 2008 and 2009 caused by the precipitous drop in car production worldwide, the automotive MEMS market will resume growth in 2010, exceeding $1.8 billion by 2013. Also by 2013, pressure sensors, accelerometers and gyroscopes are the largest opportunities, accounting for nine out of 10 sensors shipped.

The drivers for this market are mandates for ESC and Tire Pressure Monitoring Systems (TPMS) in the U.S., which require full fitment by 2012 and 2007, respectively. These markets will gain additional momentum when similar measures come into play in the European markets in 2012. Multiple sensors are needed for these systems, usually four or more pressure sensors are needed for TPMS systems.. In particular, high-priced gyroscopes are required to measure yaw rate, metal membrane-based pressures sensors used in brake modulators, and low g accelerometers used to detect sideways slip.

Emissions standards also propel the use of high pressure (2,000 bar) sensors for new types of diesel and gasoline fuel injections systems, and also particle filters for diesels, for example. MEMS sensors tend to replace older technologies such as capacitive ceramic sensors, where possible.

IT and the Industry Blues

One of the applications that is losing ground is data processing, the top application for MEMS in 2008. But as inkjet and Digital Light Projector (DLP) revenues for business projectors disappear, this market is under pressure. The credit and financial crisis has badly hurt the IT peripheral market, especially printing equipment. Shipments of inkjet printers actually dropped for the first time in 2008. iSuppli previously highlighted the fact that inkjet heads will no longer drive MEMS revenue as in the past and a heightened decline of inkjet printer sales accelerated this transition.

Medical electronics enjoy close to a 10% CAGR over the years of 2008 to 2013. But more importantly, this segment remains unaffected by the financial crisis. The medical opportunity is modest in 2013, however, at well under half a billion dollars. iSuppli does not expect mass implementation of microfluidics using glass or silicon chips in the next five years. Although drug delivery and especially MEMS insulin pumps for diabetes patients are garnering a lot of attention, iSuppli does not expect these products to be on the market in large volumes by 2013.

5-Year Device Trends

The data processing industry is transitioning from disposable print-heads to permanent print-heads resulting in lower shipments of MEMS disposable print nozzles, causing inkjet heads to lose their revenue leadership by 2013. Add to this inkjet printers continually losing ground to laser printers and this market is drying up for MEMS suppliers.

Instead, accelerometers will be the most-shipped MEMS by 2013 with well in excess of 1 billion accelerometers leaving tier 2 companies to OEMs. The price of tri-axis accelerometers has dropped substantially and will approach $0.50 for cell phone applications in 2013, moving them into mainstream phones.

MEMS microphones will also ship more than 1 billion units in 2013. New suppliers and applications such as noise cancellation will drive the market here for digital microphones.

Pressure sensors are a mainstay for automotive applications. However, unlike accelerometers, pressure sensors have failed to find a new driver in the consumer market and the niches including sports equipment are already saturated. Blood pressure monitoring, respiratory equipment and sleep apnea monitoring are bright spots, however.

(See figure 2).

Gyroscopes are needed in automotive applications for stability control and navigation, and despite the success in DSCs today, this will not make much of an impact in the market for pedestrian navigation units before 2012 or 2013.

Despite their current success, BAW filters will stagnate in 2010 as the U.S. CDMA phone market saturates. MEMS switches could do well in the future depending on if they can be included in future mobile handsets.

The Effects of Commoditization in MEMS

Overall, commoditization of the MEMS industry continues, with Average Selling Prices (ASPs) dropping by more than 9% per year from 2008 to 2013. This above-average projected erosion is a result of very high volume shipments of commoditized accelerometers and microphones, for example. Indeed shipments of MEMS devices will manage a CAGR of 17% from 2008 to 2013 and will more than double the 3 billion MEMS devices that shipped in 2008. Accelerometers for mobile phones and consumer applications, MEMS microphones for cell phones, laptops and consumer devices as well as BAW filters for mobile phones are the major driving forces for this market during the forecast period.

At least in the consumer space, achieving economies of scale is needed to retain margins. Companies managing synergies between several markets are best positioned. The most obvious overlaps are between the consumer and automotive markets—the biggest consumers of motion sensors—and where the price pressure is the greatest.

In the automotive sphere, commoditization continually erodes the value of sensors, and this is accelerated by mandates, which dictate that applications originally targeting higher-end cars are obligatory for all cars. This penalizes companies that have competed more on performance than on price in the past. iSuppli reported the closing of Systron Donner Automotive, recently. This is a direct consequence of the ESC mandate, which has begun to commoditize the gyroscope market. The financial crisis has only accelerated this process.

Conclusions

A great strength of the MEMS industry is its diversity coupled with evolving markets that become mass applications. These attributes are key to navigating and indeed overcoming macro-economic forces that continue to impact the MEMS continental landscape.