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Feb 2nd, 2011
What can we expect in 2011 in the MEMS business...?
Growth, Growth, Growth... What is funny in the MEMS business is that key structural aspects of the business have not changed since more than 15 years:
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MEMS is a very fragmented market:

- A limited number of applications have a market size above $200M (less than 10).
- Simplification of manufacturing is still an objective: The Yole MEMS law « One product, one process, one packaging » is still there
- MEMS packaging and software development are more and more adding value: sensor integration (in silicon or in SiP) and sensor fusion are key challenges for the industry
- The development of new MEMS applications is taking years to be commercialized: In average, 4 years from first developments to first commercial product and $45M of investment … and several CEOs…

But on the other hand, the business has dramatically changed due to the growth of the consumer electronic applications of MEMS devices:
- 8’’ manufacturing infrastructure (either internally or via an adapted supply chain) is a must have for companies looking to compete for the long run in the consumer electronic business.

Process optimisation is step by step happening in large companies. But MEMS foundries are really not pushing such optimisation, mainly because it is not a request from their customers. We see more and more manufacturing platforms in place, which is a good way to manage the diversity of MEMS front end and back end processing. Yole has just released a very new report analysing the manufacturing process evolution (in technology and business) and how the companies are trying either to decrease the complexity of the MEMS front end process... or embedding it into a plate form.

So what is new for 2011? Well, from my point of view with 20 years of active analysis of the MEMS market, I am really surprised by the new business model which is spreading very rapidly among MEMS companies:

Companies are more and more supplying bare MEMS die to customers... but also competitors. Just take few examples:
- Infineon is selling silicon microphones mostly as bare die to ECM manufacturers, its direct competitors. BSE, Hosiden, AAC.. are among Infineon’s main customers... and competitors
- Omron is selling its microphone die to ST which is using its sales and marketing power to promote it as its own product
- Multiple inertial sensor companies have only one device (accelerometer, gyroscope or electronic compass) but are offering a complete product portfolio by integration of competitor devices in their product family: Kionix, AKM, SensorDynamics, Analog Devices... all these companies are involved in such deals
- Microbolometer manufacturers are doing the same
How long can such collaborations stay alive? We will see in 2011...

Sensor fusion (and linked software knowledge) is more and more important:
- In inertial sensing, trying to provide a 6 or 9 axis IMU (even for consumer electronics) without a strong software engineering team is just nonsense. Companies have been created in order to support such evolution, like Movea
- In image sensing, more and more applications are requiring visible image picture but also infrared imaging. The Microsoft Kinect is an example of such sensor fusion needed to provide the functions for the applications targeted.

So what can we wait for 2011?
Clearly healthy growth is here and will diffuse in all part of the industry. Of course consumer electronics will continue its adoption of MEMS devices but also industrial, medical, defence, telecommunication... applications are all integrating more and more MEMS devices for key functions, providing the companies outside the large volume applications very strong business perspectives and growth opportunities.

As the companies are able to provide nice forecasts, more M&A will happen: end of 2010 has seen these signs of increased M&A and more will happen.

But one thing remains a key problem (or a great innovation provider): packaging of MEMS devices is more and more important: it is still 30% to 40%of the cost of a device but it is becoming not only a cost but a way to innovate, in order to make thinner devices, integrate more functions, moving to the 3rd dimension...

So, yes, the MEMS business is really moving fast and 2011 will be another incredible year of innovation, product launch, growth... and M&A.

Jean-Christophe Eloy, President & CEO, Yole Développement



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