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

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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Strategy Analytics was honoured to give the keynote speech at the plenary session of Compound Semiconductor Week on June 2, 2010 in Takamatsu, Japan.   The presentation discussed the current status and future outlook for GaAs, GaN and InP technologies covering both RF/microelectronics and optoelectronics applications.  GaAs-based devices will continue to enable next generation wireless technologies, while InP will be at the forefront of future telecom network rollouts that will enable demand for high bandwidth applications supporting traffic demands from emerging 3G and 4G networks. While the market for GaN RF and power devices is still be at an early stage, GaN-based LED devices will be pivotal to the development of future solid-state lighting markets and are currently driving flat panel TV backlighting trends. There is also an emerging opportunity for compound semiconductors in the terrestrial photovoltaic market.   Strategy Analytics forecasts that the collective market for GaAs, InP and GaN compound semiconductor devices will grow at a CAGR of 16% through 2014 to be worth over $32 billion.  The presentation, Compound Semiconductor Markets: Current Status and Future Prospects Through 2014 is now available on the GaAs service.

Dr David Allstot from the University of Washington kick-started the 2010 IEEE Radio Frequency Integrated Circuits Symposium with a review of the challenges and ongoing research into CMOS power amplifiers for use in the cellular radio front-end. Highlighting the energy consumption and CO₂ emissions from cellular handset usage, Dr Allstot emphasized the need for more efficient PAs as continued motivation for development of CMOS PA technologies.  Research into CMOS PAs has been ongoing for around 20 years, with current designs achieveing around 1W power outputs and up to 60% PAE. The performance of typical power amplifier PAs including Class A, B and E were highlighted, and then put into context with the demands of current networks which place greater importance on PAs operating backed off from peak power with schemes such as 64QAM resulting in probability distributions that translate into actual efficiencies of only 5%.  Dr Allstot provided examples of digital PAs comprising multiple PA cells and power combining techniques that have been put forward to address these issues, and highlighted the potential for Class G power PAs that feature a hump-shaped curve with the first peak aligning with probability distribution curves of a 64QAM spectral signal and offering the potential for efficiencies as high as 24%.  While these results are promising, Strategy Analytics still sees a gap in performance capabilities between GaAs and CMOS PAs which is compounded by cellular handset requirements continuing to evolve. This translates into a moving target that places greater emphasis on linearity, efficiencies and peak-to-average ratios (PAR) and in our opinion will continue to favour the capabilities offered by compound semiconductor technologies.  Nevertheless, the pervasive nature of RF technology will open up doors for CMOS and SiGe PAs, while also continuing to provide growth the compound semiconductor technologies, and this was highlighted by the second plenary talk, given by Gregory Waters of Skyworks Solutions Inc.  Mr Waters provided an overview of how the growth in the cellular handset market has transformed the RF industry into a mainstream technology with future trends pointing to greater pervasive use of RF in multiple applications. Smartphones are leading the initial trends towards more complexity in the radio chain which translates into greater content and provides continued growth for the industry.  Video is the primary driver for the RF market moving forwards with social media driving demands for always-on connectivity. This in turn will translate into more RF content going into terminals to meet these needs. Skyworks estimated that average RF content has increased by around 2.5 to 4x the content required when delivering voice-only capabilities.  The different approaches in the cellular front-end to handle these growing needs were highlighted, from multiple PAs through broadband PAs able to tackle high-band and low-band RF chains, to solutions that will cover all bands through a converged solution. This will be coupled with techniques such as envelope tracking and digital predistortion to provide more linear, more efficient RF solutions.  The other key message from Skyworks was that RF technology will become even more pervasive in its application moving forwards, with embedded RF translating to multiple applications, examples including smart metering for utilities, vending machines and passive RF technology for tracking applications.  To serve market needs moving forwards, RF companies will need to continue developing a broad base of technologies that incorporate not only the RF, but also interconnects and packaging   Strategy Analytics sees this pervasiveness as a catalyst that will open doors for Si technologies while the growing complexity needed to serve the always-on connectivity will present continued opportunities for compound semiconductor technologies.

As Seoul Semiconductor targets the US market with a 100 lm/W LED (which effectively incorporates a rectifier within the device) aimed at general lighting applications, and Cree reports breaking the 200 lm/W barrier with a laboratory demonstration, demand for highly efficient GaN-based emitters is at an all-time high. A major reason for that is rooted in Seoul’s own backyard: Samsung is largely responsible for a recent ramp of chip production required to service its own LED-backlit TVs, while Seoul is a key supplier to LG Display for the same application. The major LED consumers are finding ways to cut down the number of chips needed in key applications (for example, the 2.6mm-thick 42-inch TV that LG Display showed off at January’s Consumer Electronics Show required only 264 LEDs in its ultra-thin backlight), but it is clear that the rapid success of LED backlights in TVs, coupled with rising interest in general lighting applications, is placing the LED supply chain under some strain. Orders for the MOCVD equipment required to make LED epiwafers are through the roof, and the industry appears to have entered a sustained period of capacity-constrained supply, potentially limiting overall LED market growth. Responding to the ramping needs of LED makers, Veeco has just launched a new, higher-yielding version of its K465 tool, while Aixtron is investing up to $40M in a research facility to develop next-generation deposition equipment. The current strong cycle of demand for LEDs looks like a precursor for a much larger one in the future that will be focused on general lighting. Seoul begins mass production of its 100 lm/W LEDs  in the current quarter, but by the time the lighting market really takes off for the likes of Osram, Cree and the rest, the LED industry’s supply chain may look a little different. While the leading merchant MOCVD tool suppliers Aixtron and Veeco are scaling up efforts to service that demand, the unprecedented market pull for LEDs appears set to bring additional competition. That comes in the form of another Korean firm: Jusung Engineering. In mid-January, Jusung installed a “beta” MOCVD tool at Epivalley, also in Korea, and clearly senses an opportunity to muscle in on Aixtron and Veeco territory with its high-capacity (124x2-inch) tool. Applied Materials appears to have similar plans and we may see the market landscape for tool suppliers change significantly over the next few years. For more on this topic, see TV Backlights and their Impact on the LED Industry

Twelve months ago, the GaAs and compound semiconductor industry was caught deep in the fall-out of the economic crisis, with production at a near-standstill.What a difference a year makes! The gloom has been banished, replaced by widespread optimism, market growth and plans for company expansions.Almost without exception, the GaAs RFIC manufacturers who entered 2009 with trepidation have witnessed a strong recovery (see our latest Compound Semiconductor industry reviews). Some will even expect to post revenue growth from 2008 to 2009 – unthinkable a year ago. III-V component vendors are also witnessing the long-awaited commercial breakthrough of GaN for RF applications, courtesy of demand for more efficient hybrid line amplifiers in cable TV infrastructure. At least two GaN vendors are targeting a product ion ramp in early 2010 as operators look to cut energy consumption (see Strategy Analytics’ forecast for device demand in CATV here). But it is the light-emitting diode space that gives the greatest cause for optimism. Key equipment companies have noted a huge build-up in orders (see our November Insight here), largely the result of an expected surge in demand for LED backlights used in TVs from 2010 onwards. Strategy Analytics’ latest report on this emerging sector forecasts that, by 2013, TV applications will swell the market for LED chips by some $7.5B – more than doubling the size of the entire current market – while helping to usher in the solid-state lighting revolution in the process.Evidence to back up this anticipated explosion in demand for LEDs is now widespread, with significant capital-raising activity leading to major expansion plans announced by LED makers, substrate material vendors and equipment suppliers alike. Overall, then, it’s been a transitional year for the compound semiconductor industry. Having emerged from the global recession in a leaner but meaner form, it can now look forward to what is shaping up to be a very happy 2010. Asif Anwar

I was honoured to be present at WIN Semi's 10th Anniversary last week. The event coincided with the company starting to publicly offer its shares before going for an IPO within the next 12 months or so. Strategy Analytics headlined the event and was followed by speakers from Renesas Technology (Kunio Kambayashi – Senior VP, Board Director), Anadigics (Mario Rivas – CEO) and Avago Technologies (Hock Tan – CEO).   Our presentation introduced GaAs technology to the audience highlighting GaAs as an enabling technology for a host of markets and applications within the realms of wireless, digital consumer, automotive, defense and scientific reseach. This was followed by a review of the GaAs industry to date, highlighting the differences between the 2001 and 2009 downturn and explaining why we believe the GaAs industry is now on the road to recovery. A forecast for the merchant GaAs market was presented as well as highlighting the key players in the GaAs device market and their respective market share in 2008.   Finally, we highlighted the history of the GaAs foundry industry from the early beginnings around 1999 - 2000, when everyone wanted to be the TSMC of the GaAs industry. Our analysis at the time predicted that only a few companies would survive, highlighting that success required deep investor pockets, a range of process technologies, a strong manufacturing base and a well defined technology roadmap. Fast forwarding 10 years, our prediction has indeed come true with WIN emerging as the largest pureplay GaAs foundry in the world, helped by manufacturing trends in the GaAs industry that are favoring outsourced manufacturing to provide manufacturing flexibility, higher margins and faster time-to-market. The presentation also highlighted some of the challenges and opportunities for GaAs foundries, with cost effectiveness and technology innovation an important part of the arsenal of GaAs foundries. We closed the presentation with projections for GaAs foundry revenue growth through 2013, highlighting strong growth for this sector.  There was a large contingent of suppliers and customers invited to celebrate WIN's 10th anniversary, with local press also present to cover the event. One of the papers that covered the event was Digi-Times, which is the local newspaper specialized on IT news. The article is in Mandarin and needs to be accessed with passwords, but the link is below: http://www.digitimes.com.tw/tw/dt/n/shwnws.asp?CnlID=1&Cat=40&Cat1=40&id=0000152873_GVH7YPFY89RICH28ZK6GL&query%C3%AD%C0%B7 Asif Anwar