While I try to get current with product and financial announcements, I thought I’d spend a moment discussing some of the news from the July to September quarter. The two recently published reports: “Compound Semiconductor Industry Review July - September 2012: Microelectronics” and “Compound Semiconductor Industry Review July - September 2012: Optoelectronics, Materials & Equipment” highlight financial, product, contract and employment announcements from the compound semiconductor industry. The executive summaries of both reports focuses on the financial aspects of the industry and both segments are facing some challenges. The microelectronics segment appears to be trending upward, but it is still challenged to reach the revenue levels the industry saw in 2011. With the close of 2012, I see no reason to change my stance that when the revenue is counted, we will see a slight growth, but growth nonetheless.

On the optical side of the house, the picture is much fuzzier. The LED industry is still reeling from subsidies that have slowed and is plagued by a dramatic decrease in price, even in the face of slow unit growth. This is not only affecting the LED industry, but the material and equipment portion. Solar power continues to see a lot of political momentum as the best thing for the environment, but companies are still struggling to make money. The report has almost as many companies reorganizing and shutting down operations as those that are increasing capability, so the best direction for the industry is still not clear.

While the financial aspect is very important, it has masked some very interesting product development trends in both segments of the industry. It should come as no surprise that GaAs is under fire from other compound semiconductor technologies like GaN and SiGe, but also increasingly from silicon CMOS-based processes. The breadth of companies developing these applications is growing. On the microelectronics side, the report captures an announcement from Amalfi Semiconductor that they shipped their 100 millionth CMOS PA. Javelin also announced a CMOS PA design win in a Samsung 3G phone. The success of the CMOS PA manufacturers has been pretty evident. In the past year or so, Axiom Microdevices (Skyworks) and now Amalfi (RFMD) have been acquired by larger “GaAs manufacturers” as these companies make a relatively small defensive bet on CMOS technology as a hedge against their stakes in the nearly $3 billion handset PA market.

However, the CMOS target is not just handset PAs. The reports also capture RFaxis announcing seven new products aimed at high-volume markets as part of their “turn off the GaAs” campaign. Fujitsu announced a CMOS-based power detector and Silicon Labs and Avago announced a CMOS optocoupler. Even companies closely associated with GaAs are expanding their silicon offerings with Skyworks announcing a driver for LEDs and Hittite expanding their silicon-based ADC and clock generator offering.

So, the battle is on. The reality is that there is no perfect technology and the market selects the best solution. I’ve been saying that while silicon has a number of advantages, don’t count GaAs out just yet, especially where performance targets are steadily increasing. In a shameless plug, if you plan to attend IMS2013 in Seattle, stop by for a panel session entitled “The Death of GaAs (?)” that I will be chairing. I’m sure we will have a lively session discussing many of the same issues that I’ve raised here!

Eric

I just posted theGaAs Five Year Forecast: 2011- 2016on the website and I am happy to report that the GaAs device industry continues to be very resilient. Despite an uncertain direction in the global economy, our research shows the GaAs device market closed 2011 with nearly 6% growth and record revenues of slightly more than $5.2 billion. In fact, our analysis shows the GaAs device market has not declined since 2004 when it stood a shade below $2.4 billion. I’m taking a bit of artistic license with that statement, because we have reported that the market in 2009 “declined” by less than 0.5%, but given the economic meltdown in the US at the time and the nature of the forecasting business: I’ll put that year on the good side of the ledger.

So why is the GaAs market so resilient and less sensitive to economic cycles than other semiconductor technologies (and I’m talking about you silicon)? I think the answer lies in the performance dimension of GaAs technology. We’ve all probably heard the saying “if silicon can do something, it will”. I believe that statement and we’ve certainly seen examples where if silicon-based technologies catch up to the performance of GaAs, the cost advantages make it an easy decision to eliminate GaAs. Keep in mind, among the first applications for GaAs technology were “high-speed” digital logic and where has that market gone? We are seeing SiGe devices in LNA applications and high-frequency transceivers and we are even starting to see CMOS used for handset PAs. The common thread in the application where GaAs is being displaced is a relatively stagnant technology environment. This may be the result of long design cycles, slow upgrade of standards, specifications that remain “good enough” for a long time or a number of other reasons. Where GaAs has proven resilient and risen to the challenge is where the requirements are moving “up and to the right” quickly. As handsets have become more sophisticated with the number of frequency bands increasing quickly, GaAs is still the most capable technology. As Wi-Fi standards evolve to incorporate millimeter wave frequency and multi-gigabit speeds, the displacement of GaAs in this segment does not look quite so certain.

So, why have I gone off on a bit of a tangent? It’s because we are in a period where GaAs will have to show its resiliency once again. We may be looking at a prolonged period of global economic uncertainty that will not help the business models for network capex or consumer spending. For the last couple of years, tremendous growth in smartphone sales have really helped pull the GaAs market along, but saturation is somewhere ahead and growth rates are slowing. In addition, GaAs is still seeing stiff and growing competition from GaN, SiGe, LDMOS and CMOS.

I remain optimistic that the GaAs device market will continue to grow and the report details the effect the trends I’ve mentioned will have on the GaAs bulk and epitaxial substrate market at the very front-end of the GaAs supply chain. The underlying drivers for GaAs growth; data consumption, more GaAs content in handsets, the need for higher capacity wired and wireless networks are still in place. However, I think that the economy is the wildcard. If it doesn’t improve, the growth we see in the next few years may be below historical averages. Now, I’m not a betting man, but despite the apparent gloom, I’m not so sure anyone should bet against the GaAs industry, given the track record of resiliency!

Eric

Just back from Montreal and the IMS2012 Conference. There were a lot of interesting products and technical topics being discussed during the week, but I’d like to focus on the breakfast session entitled “Where are the Emerging RF Market Opportunities for GaN?” that we sponsored in conjunction with Microwave Journal. First off, I’d like to thank the participants from Cree, Nitronex, NXP, RFMD, TriQuint and UMS for their time, effort and input. I’d also like to thank the more than 130 attendees that took time from their schedules to hear some of our latest market forecasts and GaN product developments from the participating companies.

GaN market development has benefitted greatly from funding and research derived from the military industry. In our latest GaN market research, GaN Microelectronics Market Update 2010 – 2015, we conclude that military applications will continue to account for the lion’s share of the GaN market. Even with commercial applications starting to emerge, we are forecasting military markets will still account for slightly more than 2/3 of the estimated ~$180 million GaN market in 2015.

The panelists all did a great job of describing actual GaN products developed at their respective companies. They also confirmed that the properties of GaN make it well suited for products addressing EW, radar and communications applications, by highlighting products with some combination of high power, high efficiency and wide bandwidth performance. Of note were S-band 240W transistors from Cree with 60% PAE, 50W GaN-on-Si MMIC amplifiers from Nitronex operating from 0.8 – 2.2 GHz with 55% PAE, a 500- 2500 MHz amplifier from NXP with between 50 and 75W CW output, 50 – 1000 MHz 15W amplifiers from RFMD with more than 60% PAE, 10W PAs from TriQuint that operate from 2 – 18 GHz and 15W X-band PAs from UMS. The examples just mentioned are only the tip of the iceberg, so please visit the websites of these companies to see the depth and breadth of their product offerings and the extent of their GaN development efforts for military applications.

The presentation of commercial products also proved to be quite interesting. Initially, it seemed power conversion products in automotive applications and power amplifiers in infrastructure applications would lead GaN penetration into commercial markets. When we surveyed the industry for the GaN forecast referenced above, it seemed clear these applications were not seeing any significant GaN adoption. However, it appears that the infrastructure situation may be changing quickly as a couple of the panelists mentioned GaN capturing market share from LDMOS in macro and small cell applications. The efficiency and bandwidth performance of GaN seem to be offering enough of an advantage to achieve design wins. It should be noted that not everyone agreed that GaN, even with the performance advantages (that the LDMOS developers are working hard to minimize) was close enough to LDMOS in price to capture significant market share. So, this is certainly a dynamic market segment that we will be watching closely.

In our research, we found GaN amplifiers for CATV applications are seeing significant adoption. Our panelists agree, with most of them mentioning products for these applications. For CATV infrastructure applications, the higher efficiency of GaN-based amplifiers reduces the power consumption and OPEX, by extension. The other dimension for GaN into this market is in green-field applications (primarily), the networks can use fewer amplifiers to maintain the necessary power levels to the users. We anticipate this will be one of the fastest and largest commercial RF applications for GaN in the future.

Thanks, again to everyone who participated and attended this event. While military applications will continue to grow and drive fundamental development, I think we are on the verge of rapidly increasing commercial adoption of GaN. While CATV, infrastructure, Satcom and conversion applications are the likely initial candidates, many other applications are currently under evaluation. Keep an eye on the Strategy Analytics website as we continue to update our forecasts and thoughts on the GaN market!

Eric

In the course of the last month or so, I have had the opportunity to attend CS MANTECH, CTIA Wireless and The Cable Show. Even though these conferences address different industries and different points on the supply chain, it was very interesting to see similar threads running through all three. The conclusion is inescapable: data consumption is the engine that is driving consumer and enterprise devices and networks. These networks, whether wired or wireless, are also becoming increasingly intertwined.

The onslaught of data consumption is not new, Strategy Analytics has been following the dramatic increase for years and most top-level market presentations include some reference to this trend. I think the most succinct explanation of this trend came during a panel session at The Cable Show. Actor, director and writer Edward Burns characterized the current landscape (and I am paraphrasing here) as one of access not ownership. This was fascinating to me because Mr. Burns is not in the wireless or wired broadband industry, but he realizes the importance of the network and how consumers access his craft. It also goes a long way toward explaining the demise of “big-box” electronics and audio stores and the growth of audio and video streaming services. It also bodes well for the continued growth of the broadband industry since the high-speed broadband networks enable access.

On the convergence front, one of the big announcements at The Cable Show was that US MSOs Comcast, Time Warner Cable, Cablevision Systems, Bright House Networks and Cox Communications will allow their broadband subscribers to connect to the Wi-Fi networks of any of the companies in this agreement. This combined network will total more than 50,000 hot spots and is again interesting from several fronts. First, it shows the commitment cable companies have made toward having a wireless component to their networks. This is being done with an eye toward maintaining the “broadband experience” for customers who are nomadic outside of their homes. It also shows the concern about wireless broadband capturing share of the total broadband market.

There were presentations from CEOs of major wireless, cable and device companies that were upbeat about the trends in their respective industries. Universally, the drivers for this optimism were increasing data consumption and the advances in the networks and devices to support this consumption. Most, however, also sounded a cautionary note about spectrum availability for the wireless industry and the most efficient way to increase spectrum for the wired industry. Addressing these issues will provide both opportunities and challenges for device, equipment and network manufacturers and will likely determine the trajectory of future growth.

It has been a very lively past few weeks. It is clear the growth engine in the compound semiconductor industry is still firing on all cylinders and convergence is occurring in all segments of the electronics industry. Please keep an eye out for more detailed summaries of the individual conferences in the coming weeks.

Eric

I had a chance to provide some thoughts on changes in the CATV industry in April's cover story in Microwave Journal (Architecture and Amplifier Device Developments in CATV Networks). For an industry that had a reputation as "static" not that long ago, there are now many evolutionary (and revolutionary) changes underway. Driving these changes is the ever-increasing consumption of data. The CATV network and industry was born out of the need to impove over-the-air television reception, but increasing consumer appetite for more channels, higher definition, video-on-demand and faster internet speed has changed this network into a primary source for all communications needs.

 The CATV network plays a central role in the convergence of voice, video and data into the “triple-play” that cable and telecom network operators are bundling so aggressively to consumers. With video and internet data consumption increasing so dramatically, the traditional coax CATV network has become the HFC (Hybrid Fiber Coax) network with fiber pushing deeper into the network because of the bandwidth advantages it provides. In response to the bandwidth advantages of fiber, cable operators have responded by increasing the bandwidth of their networks, along with channel bonding schemes developed in conjunction with the DOCSIS 3.0 specification. As telecom operators like Verizon and AT&T in the US have paused to consider their fiber to the home strategies, cable operators like Comcast have been only too happy to fill the void with competitive internet and television offerings.

 So what does this mean for compound semiconductors? As is the case with wireless communications, bandwidth is still a precious resource and the need to increase the information contained in a relatively fixed bandwidth allocation means more spectral efficiency and sophistication in devices. These trends at the system level usually are enabled by the performance advantages offered by compound semiconductors. Traditionally, this was an industry that relied on silicon BJTs as the building block for the system amplifiers that boost the signal as it travels over long distances and many splits from a headend where content is added to a consumer premises. As GaAs MMIC technology has matured and the performance has improved, designers have been converting these amplifier building blocks to GaAs MMIC and hybrid technology devices.  

The latest development in the CATV network is adoption of GaN-based amplifier building blocks. The performance characteristics of GaN have long made this a favorite “replacement” technology for power devices, but for a variety of reasons, commercial adoption has been very slow. In our latest GaN market update (GaN Microelectronics Market Update: 2010 - 2015), we’ve found that GaN finally appears to be getting commercial traction in CATV networks. Initially, the thought was that the power performance of GaN-based amplifiers would allow operators to eliminate some of the system amplifiers in a typical network architecture. Operators were reluctant to adopt this idea because they didn’t want to disrupt a working architecture (“if it isn’t broken….don’t fix it”) However, these same operators have been very receptive to the idea that if they keep the network architecture the same and operate the GaN-based amplifiers at the same output conditions as the incumbent GaAs or silicon amplifiers, they realize an energy savings. The higher efficiency of the GaN devices has translated into operating cost savings (electricity), which is also ties in to the "green" initiatives that have become so important for comanies and the environment. This energy saving feature has been the single biggest reason we are beginning to see commercial adoption of GaN. 

Leading the charge are companies like RFMD, Nitronex, TriQuint and ANADIGICS. In public announcements, Nitronex claims they have already shipped more than 200,000 GaN devices for CATV applications and RFMD believes GaN for all applications will account for $15 million of revenue in 2012, with this figure doubling in 2013. They anticipate 25% of their GaN revenue will come from CATV applications in the future. 

There are still challenges to GaN adoption in the CATV market. The reliability concern is diminishing as companies build a history of operation with the technology. The biggest remaining challenge seems to be cost. Our research showed that GaN devices are commanding a price premium of 15-30% over GaAs devices. While this seems counterintuitive in the extremely cost sensitive commercial market, there is not as much price pressure on CATV infrastructure parts as there would be on a mobile handset and the operating expense savings is overriding the acquisition cost increase. Nonetheless, there is still pricing pressure. Even allowing for the premium, the cost of GaN devices appears to be in the $0.50 - $0.60/W range and some GaN foundry companies wonder whether this price reflects the true cost of the devices and if it is sustainable long-term.  

So, the technology that has long been rumored as “about to take off” seems to finally be gaining a foothold in the commercial RF market. However, along with the volume benefits of a commercial market comes the disadvantage of steeper price erosion curves. This is the driver behind the efforts to reduce die sizes for GaN devices and the efforts to develop cheaper GaN-on-silicon (versus SiC) alternatives. 

The dynamics of this segment of the compound semiconductor market are changing all the time, so stay tuned as we at Strategy Analytics stay on top of developments!

 Eric  

The Strategy Analytics GaAs and Compound Semiconductor Technologies Service (GaAs) viewpoint, “Compound Semiconductor Industry Review October-December 2011: Optoelectronics, Materials and Equipment,” captures product, technology, contract and financial announcements from major material, device and equipment suppliers in the optoelectronics market supply chain, such as AIXTRON, IQE, Kopin, Oclaro, GigOptix, Cree, JDSU, Avago Technologies, Finisar and Osram. These announcements are categorized by material and equipment, laser, LED and compound photovoltaic activity.

Despite recent, highly publicized problems at Evergreen Solar and Solyndra, solar energy continues to play an essential role in political strategy as government and the private sector seeks viable sources for renewable energy. It is easy to get a negative outlook about an entire segment when a couple of the high profile participants run into difficulties. The reality, however, is that solar energy has become a widely deployed form of alternative energy. The product development announcements we captured in Q4 provide a counterpoint to the bankruptcy proceedings at Evergreen Solar and Solyndra and show growth and activity in the compound photovoltaic technologies which underpin the solar market.

The growth starts at the begiining of the supply chain with commitments of $2 billion to increase polysilicon production by 23,000 metric tons per year. Companies like Spire, Avancis, Soitec and First Solar are expanding their photovoltaic module manufacturing plans and TSMC, through its TSMC Solar subsidiary has entered the module manufacturing arena. These announcements, coupled with more companies reporting efficiency records for solar cells points to a vibrant industry with good opportunities for compund semiconductor materials.

The outlook in the LED sector is not quite so upbeat. AIXTRON, one of the leading semiconductor equipment manufacturers reported a steep drop in revenue and orders in 2011. They blame high levels of government funding in China and financing pressures on the Asian LED manufacturers for masking a significant organic slow down in LED demand in China. It appears production in 2012 will continue to grow, but perhaps not enough to offset price erosion. Despite, this, there is still a signficant amount of development activity at companies like Cree, Bridgelux, Epistar and Luminus. These developments aim at increasing efficiency, output and affordability for applications ranging from low power consumer devices to high intensity specialty lighting and streetlights.

Eric

 For clients to read more:

The latest GaAs Optoelectrponics Industry Viewpoint, entitled "Compound Semiconductor Industry Review July-September 2011: Optoelectronics,” summarizes financial, product, contract and employment announcements from major optoelectronic material, device and equipment suppliers. These announcements are categorized as material and equipment, laser, LED and compound photovoltaic activity. During this quarter, the financial results for companies in the overall optolectronics segment were generally positive, with the majority of companies reporting quarterly revenue increases. There was a potential storm cloud on the horizon as leading equipment manufacturer Aixtron lowered revenue expectations for the year (2011) by 25%. When a leading equipment manufacturer in the very front end of the supply chain revises revenue and backlog expectations substantially downward, the entire segment takes notice. While mid- to long-term prospects for the LED market remain positive, continuing economic turmoil and rapidly dropping prices have manufacturers in the LED supply chain on edge.

Development activities across the entire sector continue to be strong. In the LED segment, blue LEDs appear to be in high demand. AIXTRON announced orders (despite the revenue warning) from several companies for equipment to be used in the manufacture of blue LEDs and Avago, Osram, Cree, Bridgelux and EpiLEDs all made product announcements of new blue LEDs. In the optical transport market, component developments targeted 10Gbps and above, while system developments also targeted data rates of 32Gbps and above. In this area,  Neophotonics announced 10Gbps transceiver modules for GPON applications and a 40Gbps transceiver for 10km single fiber applications. GigOptix, Finisar, Oclaro and Mitsubishi Electric all demonstrated 40Gbps modules, with Oclaro announcing a 100Gbps receiver.

The photovoltaic segment also saw a lot of development activity with the US government continuing to jump-start alternative energy initiatives. The US DoE announced $4.5 billion of conditional loan guarantees to support three alternating-current CdTe thin-film PV generation facilities that will total more than 1.3GW of capability. They also announced round 8 of funding opportunities for solid-state lighting technology and a $197 million loan guarantee for facilities that will produce about 400MW of flexible CIGS modules each year. The approach seems to be working, as several activities previously linked to DoE loans made announcements in this quarter. These plants target more than 560MW of solar energy output.

Eric

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