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.

-Eric

As GaAs device manufacturers announce their financial results for the 2011 calendar year, it is becoming clear that while the industry grew, the growth was not on par to 2010’s banner year. In addition, announcements from compound semiconductor manufacturers Skyworks, RFMD and Freescale all point to revenue declines to close 2011. The Strategy Analytics GaAs and Compound Semiconductor Technologies Service (GaAs) viewpoint, "Compound Semiconductor Industry Review January 2012: Microelectronics," captures product, technology, contract and financial announcements for these companies, as well as others such as Fujitsu, ANADIGICS, Agilent, Hittite Microwave, TriQuint Semiconductor, Avago, Soitec, Analog Devices and Microsemi.

While it always pays to be vigilant to spot trends in the GaAs market early, we do not think there is cause for concern, just yet. Even though we are seeing revenue growth rates slow from some of the larger compound semiconductor manufacturers in the fourth quarter, some of this is attributable to seasonality. With handset manufacturers driving so much of the GaAs device market, it is not surprising to see demand spike in the third quarter as handset OEMs prepare for the holiday season. 

Even with the revenue declines in the fourth quarter, consumer demand for applications and data consumption continues to increase sharply. As operators implement new frequency bands and more sophisticated modulation schemes to try to keep up with the demand, the value of GaAs devices incorporated into handsets and mobile networks is increasing. While we believe these top-level trends will continue to drive growth, smartphone growth is slowing as early adopters have already jumped aboard the bandwagon. This, couple with increasing market share from silicon-based technologies will act to modulate GaAs growth in 2012. At this point, Strategy Analytics expects 2012 revenue growth for the GaAs device industry to be close to the historical average of 6%

This viewpoint summarizes financial, product, contract and employment developments from leading compound semiconductor device suppliers from January 2012. These announcements address a variety of commercial and military applications that use gallium arsenide (GaAs), gallium nitride (GaN), Silicon carbide (SiC), silicon germanium (SiGe) and complementary metal-oxide-semiconductor (CMOS) technologies.

Eric

For Current Clients to Read More:

 

The slowdown in the GaAs industry supply chain extended through to the first half of 2009, but a robust recovery in the second half resulted in SI GaAs substrates volumes, both bulk and epi, still growing year-on-year. Orders started to filter through in the second quarter of 2009 as end-users looked to re-build stock levels and  Strategy Analytics models show that by the end of the second quarter, the market had started to see robust demand for materials and devices through the whole GaAs industry supply chain.  While we continue to see silicon technologies encroaching further into traditional markets for GaAs, we didn’t see any major paradigm shift in the architectural makeup of cellular terminals during the slowdown.GaAs-based power amplifiers and switches continued to be the incumbent technology in the RF (radio frequency) front-end. This is especially true for the next generation of phones, where our previously forecasted trends of multi-mode and multi-band operation are especially relevant.   Significantly, not only will GaAs technology be central to supporting the fastest growing “smartphone” category of cellular handsets, but there is also an increase in the ratio of PAs per terminal as well as more complex switching requirements. This will drive up demand for HBT and pHEMT devices and the subsequent demand for epitaxial and bulk GaAs substrates.  Augmenting this demand from cellular handsets will be the uptake of wireless broadband based on cellular radio technology implemented in notebook computers, USB dongles as well as other platforms including M2M and energy monitoring markets. Adding to this demand will be increasing functionality such as Wi-Fi and GPS being incorporated into handsets, which provides additional opportunities for GaAs technology.  Strategy Analytics’ studies are projecting five-year compound annual average growth rates of up to 12%, translating into volumes growing by as much as 160% through 2014. Clients can access the latest reports and data models outlining these forecasts,

• Semi-insulating GaAs Substrate Markets: 2009-2014
• Markets for SI GaAs Substrates: 2009-2014 (data table)
• Markets for SI GaAs Epitaxial Substrates: 2009-2014
• GaAs Epitaxial Substrates 2009-2014 (data table)

With the industry currently facing a feeding frenzy as demand for smartphones continues to outstrip the rest of the cellular handset market, are these growth projections too low? Let us know what you think.

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.