I hope everyone had a chance to attend the GaAs Market Trends & Results webinar I hosted last week. If not and you are interested, please click on the link to view the replay. The RF GaAs supply chain remains very dynamic, with some interesting trends driving the substrate and device portions of the market.
As I’ve mentioned in previous blogs and presentations, the top-level driver for GaAs devices continues to be the increase in data consumption. Some of the latest estimates have mobile data consumption growing at rates approaching 100%, which means IP data consumption will double every year from 2009 – 2016! Even with this impressive growth, these estimates claim mobile data will still be less than 10% of total IP data in 2016. This is important, because while wireless applications continue to drive the GaAs industry, the wired broadband, CATV and transport networks and enterprise applications are also growing and represent opportunities for GaAs devices.
One of the advantages of GaAs is the performance makes the technology useful for a wide variety of commercial and defense applications. So, while the entire industry must continually pay homage to the handset portion, the diversity of applications does help buffer some of the market instabilities. The result for 2011 was another year of revenue growth in the GaAs market. This roughly 6% growth raised GaAs device revenues to about $5.2 billion. Neglecting an essentially flat year in 2009, GaAs device revenues have grown since a decline in 2004, so things have been good in the GaAs supply chain.
There are some storm clouds on the horizon, however. Handset opportunities represent more than 50% of all GaAs device revenue and the broader handset market does not grow explosively. The GaAs market has been helped by the shift toward feature phones and smartphones that have much higher GaAs content and the introduction of more and different frequency bands of operation. Many of the large handset device OEMs have converted from GaAs to SoI for handset switches, turning the handset GaAs opportunity increasingly into a power amplifier opportunity. Since handset switches are very inexpensive, this conversion has not had much effect on GaAs revenue, but the quantity reduction has had a definite impact on the bulk and epitaxial wafer manufacturers. We’ve seen reductions in demand and an upswing in MOCVD production at the expense of MBE devices.
In addition, we’ve all gotten used to larger smartphones that accommodate bigger screens, but you’ve probably noticed a trend toward thinner phones. To meet the demands of more frequencies and form factors, the device OEMs are releasing multi-mode, multi-band amplifiers that allow a single device to replace multiple existing PAs. Given the price and volume pressures from the handset market, it is unlikely that the multi-mode amplifiers will be larger or more expensive than the amplifiers they will replace, so this looms as a potential issue for the substrate and device markets.
However, even with the storm clouds, the GaAs device market has proven to be very resilient. As long as the performance requirements for the various applications keep increasing, GaAs has historically proven to be up to the challenge. Even with smartphone growth slowing (still strong, but slowing), the avalanche of data consumption is driving things like new Wi-Fi standards, higher frequencies for wireless backhaul, “small cells” in wireless infrastructure and higher data rates in transport networks. All these developments should give a boost to the GaAs supply chain.
Since we are almost through 2012, I should add a thought or two about where the market appears to be headed. It looks like we will see some growth in 2012, but at a much lower rate than the historical average of 6%. On a positive note, in a previous blog (At the Halfway Point of 2012: GaAs Device Industry Shows Small Gain ), I introduced the idea of “pressure curves”. While the results are not complete yet for calendar Q3, initial indications show the GaAs market is growing. This, coupled with positive guidance from some of the larger GaAs device OEMs for calendar Q4, may mean we are in for a bit of a rebound, so stay tuned.