Amid a commodization paradox, Chinese players taking off, sales stabilization and new applications, how can the MEMS industry regenerate value?
What does the future hold for the MEMS industry?
Recent years have been a golden age for MEMS markets, with large, increasing volumes driven by consistent smart phone shipment growth. We have now entered more uncertain times. The market for smart phones/portable applications is levelling out, meaning MEMS markets are growing more slowly than in previous years. Today, we believe the compound annual growth rate (CAGR) from 2015-2021 for the value of MEMS markets will be 8.9%, moving from $11.9B to $20B. Over the same period the CAGR of units shipped will be 13%.
Consumer is no longer a goldmine…
The consumer market is challenging MEMS manufacturers. Although volumes are still increasing, this market is becoming highly competitive. Use of sensors such as MEMS microphones, inertial, pressure and gas sensors in mobile phones is spreading, but these devices have very low margins today. Meanwhile, end users are giving their suppliers a hard time as the business relationship is sometimes very short, shifting from one device maker to another. Moreover, we do not see large volume markets being a short-term growth driver for MEMS:
- The Internet of Things (IoT) is still a niche market today. The main applications are industrial, not looking for low costs and large volumes
- Wearable electronics applications look very promising as part of the consumer industry, however volumes are not yet high.
… but there are some rich seams in other markets Industrial, medical and automotive applications still offer pockets of growth and profitability. The car industry is still hungry for sensors, with 20 MEMS devices per car on average today, and autonomous cars might offer more possibilities for MEMS technologies. New opportunities in medical come with long-term developments that are finding the market today. These include silicon microfluidic chips for medical micropumps, with Debiotech earning significant revenue from its MEMS micropump in 2015. Industrial and defense markets also provide growing opportunities for high-end and high-margin devices such as inertial and pressure sensors.
And China is taking off
For the first time in our “Status of the MEMS Industry” report, a complete chapter will deal with China. The Chinese MEMS industry is transforming from “Made in China” to “Created in China”. The current establishment of Silex’s new 8-inch MEMS fab in China is a clear sign of this transformation. Chinese MEMS companies are trying to improve the performance of products such as MEMS microphones, pressure, inertial and magnetic sensors, microbolometers and microfluidics to make them competitive globally. China's MEMS industry is consequently growing steadily. It will be interesting to see which giant company emerges over the coming decade.
How can companies escape the commodization paradox?
Over the past five years, the MEMS industry has been driven by increasing volume from the consumer industry with smart phones and wearables. This industry has in turn pushed for smaller dies for integration in thinner handsets. This reduced prices, shrinking margins so that the MEMS market currently does not have the same comfortable growth rate as previous years. There are several ways to escape this commodization paradox:
- The “Production Infrastructure” pathway with either shared manufacturing infrastructure cost with other applications, for example between automotive and consumer, or improved processes that lower cost, like CMOS MEMS.
- The “Creation of Value” pathway with either new devices, like gas sensors, merging with other sensors to make combos, or improved sensor output. The CMOS image sensor (CIS) industry offers an example of the last option, solving the commodization issue by increasing pixel and die size, and therefore also price, as customers value high quality pictures.
“Creation of Value” is closely linked to the growing importance of software embedded within the sensor to deliver higher level functions for system makers.
Be ready, there are new challenges ahead!
We believe the MEMS industry is moving progressively towards integrating existing and new sensors into predefined clusters. Actually, the three clusters already exist, as shown in figure 3: the closed package sensor cluster, the open cavity cluster and the optical cluster.
- The closed package sensor cluster includes inertial sensors, typically multiple axis accelerometers and gyroscopes, and magnetic sensors.
- Open cavity clusters will likely host the devices that need access to the external world, for example pressure sensors can combine with humidity sensors and potentially gas sensors as all interface with the environment.
- We are also convinced that the third cluster will be optical. This could lead to integration of more sensors, including MEMS autofocus.
The MEMS industry continues to evolve with new markets and new challenges, as shown in figure 4. Previously, the main MEMS challenges were decreasing size, which in turn led to price decreases then volume growth. Today, the trends are different. They are: importance of user case, meaning device development must start with the definition of an application, fusing different sensors with software and decreasing power consumption, which paradoxically is linked to increasing chip size.
Outlook for 2016 and beyond
We believe the MEMS markets will continue to grow and will provide interesting business opportunities. We see new devices coming that could be interesting growth drivers in the future, including gas and environmental sensors and combos, ultrasonic MEMS, and silicon microfluidics. Along with these new devices, some established ones promise more growth such as radio-frequency MEMS or inertial measurement units (IMUs).
2016 might be challenging for MEMS companies, but there are also opportunities with emerging and growing demand for pressure and gas sensors, fingerprints, and autofocus shaping the consumer market. We believe the future growth of the MEMS market will be driven by various applications, including smartphones, wearables, automotive and medical.
- Updated MEMS market forecast up to 2021.
- New ranking of MEMS players/foundries for 2015.
- New list of major trends and developments in the MEMS industry and markets.
- Updated information on MEMS devices, applications and supply chains.
Objectives of the Report
This report’s objectives are to provide:
- Understanding of MEMS markets and applications
- MEMS player dynamics
- MEMS market data in units and $M for 2015-2021
- Identification of future MEMS devices
- Presentation of MEMS game-changers and industry trends
- MEMS application overview, covering automobile, consumer, defense and aeronautics, medical, industry and telecommunications
- MEMS financial analysis