February outlook: where IC markets are headed
There's good news and bad news about one server market; here is a growth market if there ever was one; disk systems market will double in 5 years; workstations will be weak in first quarter, but full year looks better; handheld organizers and cell phones converging but both keep growing; microdisplays about to enter mass market; projection display sales to double in next five years; CMP slurry sales will grow fourfold in next 4 years; 2001 could finally be year of smart card in U.S.
By Robert Henkel
Semiconductor Business News
(02/14/01 08:19 a.m. PST)
What happens when
market grows 30% in quarter?
More competition of course
FRAMINGHAM, Mass.--There's good news and bad news about the rack-optimized server market. These models are "significantly outgrowing" the rest of the server market, says International Data Corp., but this strong performance is attracting swarms of vendors. As a result, the competition here is "significantly heating up."
Shipments increased more than 30% every quarter in 2000, IDC estimates. Third-quarter revenues in this segment were an astounding 392% more than the year-ago quarter, the market research firm states.
"At the beginning of 2000, local assemblers with little known brands were fulfilling most of the market's demand, and very few major vendors were paying attention to this space," notes Mark Melenovsky, IDC research manager. "Today," he says, "almost every major vendor has announced or will announce additions to their rack-optimized product offerings."
To make matters worse now, in addition to the increasing number of players now crowding this market, IDC says the demand is starting to soften. "The dot-com and B2B shakeout, fulfillment of thin server need, and the weakening economy are causing demand in the rack-optimized server market to shift," says IDC analyst John Humphreys.
"While this segment will still outperform the overall server market, future growth will be more closely tied to Internet build-out," Humphreys says, "and we expect companies to take a more conservative approach to infrastructure build-out in 2001."
With competition heating up, those vendors that position their products as total solutions will have the upper hand, IDC believes. "Margins can no longer be maintained by building faster more robust systems with all the bells and whistles," Melenovsky says. The key is to marry the hardware platform to the workload to optimize the solution's price performance, he says.
Here is growth market
if there ever was one
OYSTER BAY, N.Y.--In the hyped language of today's market researchers, growth over the next five years in the market for millimeter wave devices was called "astonishing" by Allied Business Intelligence.
But the research firm based here certainly hangs its hat on a growth rate that rates such a description. Allied predicts the market for millimeter wave and other high-frequency devices will nearly quadruple in five years, growing from $3.5 billion in 2000 to $12.4 billion in 2005. That would be astonishing.
"Growth in the millimeter/high-frequency market will mainly be the result of broadband applications," says research director Andy Fuertes. "However, automotive applications will become a significant growth factor within the next 10 years as well." Though much of the market today is the result of traditional backhaul applications, he says that growth will be driven by new applications such as local multipoint distribution service (LMDS), auto collision warning and broadband satellite systems.
The key market in the short term will be LMDS. Over the next five years, this application will grow from 9% of total revenues in this market to 30%, says Fuertes.
The picture also looks bright for broadband satellite systems. GEO systems that are scheduled to deploy as early as next year promise to bring broadband coverage to all parts of the world, Allied notes.
Auto collision systems continue to penetrate the trucking industry and this should lead to growing sales in the passenger vehicle market. The primary barrier here is still cost, but Allied points out that there are now intensive efforts going on to reduce costs. As a result, the market researcher expects major cost reductions to be made over the next five years. By 2005, it expects microwave-based collision avoidance systems sales to grow to 1 million units in 2005.
As a result, Allied sees the market for high-frequency gallium arsenide devices growing considerably, to more than $200 million in 2005.
IDC sees 5 good years
for disk storage systems
FRAMINGHAM, Mass.--The next five years are still looking good for the disk storage industry. International Data Corp. expects worldwide revenues will grow at a compound annual growth rate of 12% to $53.3 billion in 2004 nearly double the 1999 market of $28.4 billion.
Several things are causing this growth, according to Charlotte Rancourt, director of IDC's Storage Systems program. "One factor is the migration to networked storage," she says, "in which demand for nonstop access to information anytime/anywhere will continue to drive storage strategies and revenue growth."
Also pushing the market, IDC says, are: packaged applications such as customer relationship management, sales-force automation, and datamarts; Internet and intranet investments by traditional brick and mortar companies; datawarehousing applications growth; and storage-intensive consumer applications such as imaging.
New consumer markets will continue to drive demand for storage. One of them will come from telephone and cable companies as they introduce infrastructure that can move large amounts of data efficiently and cost-effectively.
"The demand for graphic-intensive applications, the popularity of viewing digitized images at online auction sites, the migration from hard copy to soft copy, and demand for Internet-enabled distributed access to medical images and records on the Web demonstrate the continuing need for more storage capacity," Rancourt said.
Workstations will be weak in Q1 but
Dataquest optimistic about entire year
SAN JOSE--There is growing concern that the slowing economy could hurt the workstation industry, but Dataquest Inc. is optimistic about 2001 for this market.
Last year was a good year. Worldwide workstation shipments exceeded 1.6 million units in 2000, an 11% jump over 1999 shipments, according to preliminary results from Dataquest.
The industry may see some upturn in 2001 because volume shipments will begin of the Pentium 4-based uniprocessor workstation, predict analysts for the market research firm. "The industry is still anxiously waiting to see the market reception for the Pentium 4-based uniprocessor workstations," says Pia Rieppo, workstation analyst for Dataquest.
Dell shoots into first place in global workstation sales
Preliminary global unit shipments
2000
Shipments 2000
Share (%) 1999
Shipments 1999
Share (%) 2000 vs. 1999
Growth (%)
Dell 381,718 23 238,184 16 60
Sun 358,909 22 322,541 22 11
Hewlett-Packard 289,674 18 312,031 21 (7)
Compaq 230,248 14 208,268 14 11
IBM 176,264 11 217,774 15 (19)
Others 215,439 13 193,686 13 11
Total 1,652,252 — 1,492,484 — 11
Source: Dataquest
"They represent a significant change in product positioning" she says, "since dual processor scalability is a key component of the current IA workstation definition. Because the product was introduced in the fourth quarter, shipments were only in the hundreds [last year]," said Pia Rieppo, workstation analyst at Dataquest. "We expect the Pentium 4 ramp up in the first and second quarters of 2001," she says, "although many end users may bypass these workstations and wait until the dual-processor chipsets and the Pentium 4 Xeon CPU arrives this spring."
Three of the top-tier vendors racked up double-digit growth rates in 2000, Dataquest says. Dell moved into the No. 1 position as its market share surpassed 23% in 2000, knocking Sun Microsystems out of the lead. IBM slipped from fifth to fourth place as Compaq moved up in its place.
The fourth quarter, however, caused some concern among workstation manufacturers. "A number of vendors reported slackening demand in the U.S., which consumes about half of the current [global] workstation shipments," says Shahin Naftchi, Dataquest analyst covering servers and workstations. "Our research shows that the U.S.market is expected to continue to be weak in the early part of 2001."
Despite growing competition
handhelds, smart phones will keep growing
PHOENIX-Two exploding markets, cellular phones and handheld organizers like the Palm Pilot, are quickly converging into a single fast-growing market. But the new competition shouldn't slow down either one of them, according to a new study from Semico Research Corp. here.
The market researcher predicts strong growth for both end markets over the next five years. Smart phones will grow between now and 2005 at a compound annual growth rate (CAGR) of 53%, while Palm devices will rise at a 33% CAGR.
To stay competitive, handheld device makers are continuing to keep piling on the features, Semico notes. Right now, the Palm operating system has won the market for palm-top devices, but it says the battle is far from over.
Microdisplays about
to enter mass market
SAN JOSE--Microdisplays are about to enter the mass market. That's the word from Stanford Resources, which expects the microdisplay industry to show strong growth over the next five years.
"Microdisplays have made tremendous strides in both technical quality and manufacturability, notes analyst Kimberly Allen. "Microdisplay technology has enhanced the performance of existing products, such as front projectors and viewfinders, but even more importantly," she say, "it enables new products such as high-information-content mobile displays that simply couldn't be made any other way."
The market covers four technologies (LCD, LCOS, MEMS, and emissive/scanning), 10 applications (7 near-eye and 3 projection), and five pixel formats.
Microdisplay unit shipments are dominated by near-eye applications, while market value arises mostly from projection applications. This situation will continue, Allen says. By 2006, near-eye applications will account for 74% of the units, while projection applications will account for 71% of the market value, she predicts.
LCD microdisplays will continue to lead in both shipments and value compared to other technology types, Allan estimates. However, the LCD's position will diminish from 97% of the units and 79% of the value in 2000 to 70% of the units and 57% of the value in 2006, she says. This is due primarily to the stronger growth of MEMS and LCOS.
LCOS microdisplays will account for 23% of the camcorder viewfinder market by 2006, she predicts. Among all LCOS applications, camcorder viewfinders will take the lead in units in 2002 and in market value in 2005, surpassing front projection in both cases, according to Stanford Resources.
MEMS-based rear-projection televisions will rapidly increase their share in the microdisplay-based RPTV market, rising to account for 65% of units and 84% of value in 2006, Allan says. LCOS-based systems will account for 16% of units and 10% of value.
The microdisplay industry allows for flexible business models that more closely resemble the semiconductor industry than the established display industry, Allan points out. It is not yet clear, she says, whether the overall industry will adopt the flexible "foundry" model, remain with the traditional vertically integrated structure, or form a hybrid system.
Projection display market
to double in next five years
SAN JOSE--Global unit shipments of projection displays will more than double from 3.3 million units in 2000 to 7.1 million units in 2006, according to Stanford Resources. Market value will grow from $11 billion in 1999 to $17.9 billion in 2006, the market researcher says.
Showing the strongest growth will be ultraportable projectors, or those units weighing less than five pounds. "Shipments of three-pound projectors will grow from 30,000 units in 2000 to 1.2 million units in 2006,' predicts Sweta Dash, research director at Stanford Resources. Despite their size, she says, these unit "offer brightness and resolution equivalent to larger, heavier models and easily meet the performance standards required for business presentations."
Front projection display unit shipments will triple within the next six years, Dash says, growing from 1 million units in 2000 to 3 million units in 2006 for a 31% compound annual growth rate (CAGR).
Also showing strong growth are front MEMS/DLP systems which will grow at a 52% CAGR, accounting for 30% of the front projector market by 2006, according to the market researcher. The growth potential for front liquid-crystal-on-silicon (LCOS) projectors is very high, Dash says, due to the expected success of ultraportable projectors in the business market. She predicts a 55% CAGR through 2006.
Worldwide unit shipments of rear projection displays will grow from 2.3 million units in 2000 to 4.1 million units in 2006, Dash predicts. Cathode ray tube technology dominated last year's rear projection market, but LCOS technology will show the highest growth rate over the next six years, she says, racking up a CAGR of 167%.
Consumer applications made up the largest segment of the market last year, accounting for 69% of unit shipments and almost 51% of the market value. Business applications made up the second largest segment with more than 25% of the unit shipments and 36% of the market value, Dash says.
Cabot grabs 75% of global slurry sales,
which will grow fourfold in next 4 years
AURORA, Ill.--When you talk about slurry sales for use in chemical mechanical planarization (CMP), you have to talk about Cabot Microelectronics Corp. here. This supplier continues to dominate this market, increasing its share to 75% of worldwide slurry sales in 2000, according to The Information Network.
These sales amounted to $285 million last year, according to the New Tripoli, Pa., market research firm. It expects strong growth in CMP slurry sales worldwide during the next four years, projecting that merchant slurry revenues will jump fourfold from $285 million in 2000 to $1.1 billion in 2004. This year revenue will climb 45%, according to the research firm.
Cabot Microelectronics should continue to increase its market share, predicts Robert N. Castellano, president of The Information Network, "despite the market entry of several competitors and the threat of a slurryless CMP technology." Cabot has just reported that revenues doubled to $69 million in its first fiscal quarter ended Dec. 31, compared to $35 million in the same period a year ago. Net income in the quarter reached $14.4 million vs.$4.7 million a year ago.
Although the chip market is soft now, Cabot expects its revenue to grow in excess of 50% this year. And because of this slightly higher growth and slightly lower costs, it predicts earnings between 16% and 18% of revenue.
Nearly a dozen competitors trail far behind Cabot in the slurry market, according to The Information Network.
2001 could be the year
of smart card in U.S.--finally
AUSTIN, Tex.-- The worldwide smart card industry came of age in 2000, as open platform cards achieved mass volumes for the first time. Shipments grew 27% to reach 1.8 billion cards 790 million, according to Schlumberger Test & Transactions.
Grow will continue in 2001 at more than 20%, according to Schlumberger, driven largely by wireless applications as mobile commerce emerges. This year will also see the first volume roll-outs of USB (Universal Serial Bus) compatible cards, and the first substantial growth in the merging U.S. market.
The star application for smart cards last year was subscriber identity module (SIM) cards for mobile phones, a sector that grew by more than 70%. The high-end segment of the market has standardized on Java cards, and was the major contributor to a growth of 700% in open platform technology. Java cards now accounts for some 15% of all shipments of microprocessor-based smart cards.
Mobile com is new smard card driver
Global sales and forecast in millions of cards 2000 2001 Growth 00/01 2003
Payphone 1080 1190 10% 1410
Mobile communications 350 500 43% 800
Banking 120 150 25% 310
Healthcare 65 70 8% 110
Transport 30 45 50% 80
Others 145 215 48% 390
Total 1790 2170 21% 3100
... But North America trails rest of world ...
Europe, Middle East, Africa 890 976 45% 1240
Asia Pacific 485 652 30% 1024
Latin America 350 434 20% 620
North America 65 108 5% 216
... As microprocessor cards take over
Memory cards 1250 1432 66% 1840
Microprocessor cards 540 738 34% 1260
Source: Schlumberger
The next largest market sector was banking cards, which achieved double-digit growth. Pay TV and ID cards grew strongly, with the continued rise of digital TV and the emerging need for PC, Intranet, and Internet security. Payphone cards, the major application category for memory chip-based cards, accounted for well over half of the industry's total card shipments--or more than a billion units. But this market was only one-sixth of the industry's revenue and is now very much a commodity market dominated by two suppliers.
The U.S. market, which has trailed the rest of the world in smart card growth, is due for a significant increase in sales, according to Schlumberger. This is because of the growing demand for IT security, banks following the American Express Blue initiative, and the growing adoption of SIMs for TDMA and CDMA platforms. These forces could result in sustained growth rates of more than 50% for the next three years, Schlumberger says.
"2001 could be a breakthrough year in the US market for smart cards," declares Olivier Piou, president of Schlumberger Smart Cards. "With three major drivers . . . we may at last see significant activity."
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