I recently attended CS MANTECH in New Orleans and GaN was the favorite topic of the presenters. Nearly 50% of the presentations and posters at the conference mentioned GaN in the title. Now, GaN is not a new topic, but it’s been interesting to watch as the interest level increases down the supply chain, from the equipment manufacturers to the device manufacturers to the material and manufacturing equipment manufacturers. It’s been fun to watch, it’s like realizing that someone who has been close to you for a long time has suddenly assumed a much more important relationship.

Befitting a manufacturing conference, many of the GaN presentations addressed improving manufacturing readiness and making GaN devices more producible. We also heard reports of process and reliability improvements. A couple of things were abundantly clear from the presentations: government funding and collaboration between the public and private sector is still a driving force behind GaN developments and most of the development activity in the RF sector is for GaN-on-silicon devices.

This makes perfect sense as GaN technology tries to complete the transition from “great potential” to a proven, commercially viable technology with widespread adoption. GaN has been the “next big thing” for a long time but for a variety of reasons, devices have not gotten much traction outside of military applications. From the presentations I saw, this portion of the supply chain is hard at work to remove concerns about GaN manufacturing, reliability and repeatability.

I have just updated my GaN forecast and it can be found on our website: GaN Microelectronics Market Update 2012-2017. I found a market that is still driven by aerospace and defense applications and funding, but slowly seeing commercial adoption of the technology. I am forecasting that the overall market will grow strongly, with a CAAGR of 28% through 2017. As I did my research, it became clear that many commercial market segments are getting close to a point of inflection in GaN adoption, but most aren’t quite past that point just yet. There continues to be strong adoption of GaN devices in CATV infrastructure applications and wireless infrastructure applications are now seeing growth. Other RF commercial applications like microwave and millimeter wave radios and VSAT or Satcom networks present intriguing opportunities for the advantages of GaN and it looks like those segments will be contributing nicely to GaN device revenue in the near future.

The most interesting opportunity for GaN devices looks to be the power management segment. This is presently a very large market and the anticipated increase in data consumption and concern for energy efficiency should support continued growth of this market segment. GaN-on-silicon is the technology of choice for these applications. Manufacturers are already producing low cost GaN devices that are very competitive with the cost of the incumbent silicon-based technology, while easily surpassing the performance. I am forecasting that this segment will see explosive growth, with a CAAGR of slightly more than 90% over the forecast period.

I haven’t forgotten the aerospace and defense segment! The big uncertainty in this segment in the near future is the sequestration process in the US. This has added substantial uncertainty to the US DoD budget, but we remain optimistic that even if this issue is not resolved, GaN will still grow in these applications. We believe that with more scrutiny on where the budget dollars are spent, systems will become more sophisticated and this will mean more electronics content. Aerospace and Defense applications have accepted the technical superiority of GaN for quite some time. We think GaN will continue to capture share from other technologies and the net result will be more GaN content, even in the face of shrinking US DoD budgets.

Look at the report if you have a moment and please feel free to share your thoughts. This remains an extremely dynamic market with product, process and manufacturing developments occurring quickly. With so many commercial market segments being close to volume adoption of GaN devices, the overall market is likely to remain very dynamic and exciting, so stay tuned!

-Eric

Okay, I apologize for the bad pun, but it does seem like the Fiber Optic market is finally trending upward. I attended the OFC/NFOEC Conference in Anaheim in March and although a bit late, I’m glad that April came and I can describe some of the developments. I was impressed with many of the technology, product and market developments on display.

At the top level, this market segment has floundered, directionless for the past several years. After good growth in the middle part of the 2000’s, the overall optical market ran into trouble in 2009 as the global economy faltered. The result was a drop in revenue of about 15%. With the exception of a short-lived spike in 2011, the market has been relatively flat. This behavior is understandable, because upgrading, expanding or initially deploying an optical transport network is a capital-intensive exercise and the uncertain direction of many regional economies only adds to the challenge. The wildcard in this scenario however, is the seemingly insatiable desire to consume data.

We tend to focus on growth in the mobile data consumption that is enabled by the vast array of wireless devices we’ve all grown so dependent on, but that’s not the whole story. As I am fond of pointing out, even with mobile data roughly doubling every year from 2009 to 2016, it will only account for roughly 10% of the total in 2016. The other portion of data consumption comes from Internet, high-speed broadband, CATV and enterprise data applications. Even with the backdrop of a still uncertain economy, it is becoming clear that transport network upgrades are essential to ensure future data increases are feasible.

It appears operators are finally committing the capital resources and this looks likely to set up the overall optical market for steady future growth. At the component level, another interesting trend I observed is the rapid conversion to higher capacity networks. It appears 10Gbps systems are the workhorse of the network, with lower capacity systems all but disappearing. Another thing that seemed clear was that while 40Gbps systems will grow, they won’t represent as big an opportunity as originally thought. There are currently four modulation schemes used for these networks: optical duo binary, DPSK, differential quadrature phase-shift keying (DQPSK) and dual-polarization QPSK or DP-QPSK. While this lack of standardization allows suppliers to differentiate their designs, it does not allow for economies of scale and the cost reduction standardization usually entails. At the same time, the cost of 10Gbps systems has been dropping quickly. These factors seem to be leading operators to consider jumping directly from 10Gbps to 100Gbps networks, skipping 40Gbps in the process. It appears from the Marketing presentations and the products I saw, that 100Gbps system will see the fastest growth, by far! For more information on growth rates, segmentation, quantities and market values for optical transceivers, please look at Capacity Requirements Driving Fiber Optic Market.

The other big topic at the show was silicon photonics. This idea seems to divide the audience into two distinct and passionate camps. One says, “we’ve been hearing this now for years, but where are the production products?” The other camp is more than ready to discuss the benefits of silicon CMOS processes for cost and power reduction. One thing that appears to be different from the past is the dramatic increase in enterprise applications and “big data”. As server farms grow, so does the need for fast, cheap, low power, short-reach connections. This need seems very well suited to the capabilities of silicon photonics. While the technology doesn’t appear to meet the needs of every application, there is certainly a lot of development effort and it will be interesting to see how quickly silicon photonic circuits penetrate short-reach enterprise applications. Stay tuned!

-Eric

With the financial reports in the books, it’s time to close out 2012. The good news is that GaAs device revenue closed 2012 up slightly to reach another record at slightly more than $5.3 billion. The small gain was driven by strong fourth quarter performance from the industry after a sub-par third quarter just about erased the gains for the entire year.

Handsets and smartphones, in particular, remain the driving force behind GaAs device revenue growth. The growth of smartphones with their increasing GaAs device content helped propel the handset segment to more than 50% of the entire market. Not surprisingly, the companies associated with handset devices remain the revenue leaders. Skyworks Solutions again saw their revenues increase faster than the market and they remain the largest GaAs device manufacturer, stretching their lead over TriQuint. On the pure-play foundry side, WIN Semiconductors continues their impressive growth trajectory and they have become the dominant company in this segment.

We expect a good uptick in cellular terminal shipments in 2013, along with smartphones continuing to capture market share. I am expecting this will propel GaAs device revenue growth in 2013 into the 8 -10% range. With some of the predictors I use to track the market, I think there are signs that this growth is taking root. For more details, clients of the GaAs service can access my GaAs Device Industry Closes up in 2012 Insight.

However, even with above average growth looking likely in 2013, all is not rosy for the GaAs device market, long-term. The first threat to growth comes from within. The dizzying number of LTE bands, coupled with a desire for the “world-phone” has given rise to the multi-mode, multi-band (MM-MB) PA. This has some serious repercussions, because this market is so price sensitive that it will not tolerate bigger and more costly parts, so these MM-MB PAs must be smaller and cheaper than the PAs they replace or it won’t make sense to use them. We’ve already seen substantial design and design-in activity, so these devices are beginning to see commercial traction.

The other, serious threat was unveiled at the recently concluded Mobile World Congress (MWC). Qualcomm fired the first shot across the bow with their pre-conference announcement of the “RF360”. The company calls this family of devices a complete, all-encompassing CMOS RF front-end subsystem. This subsystem consists of an antenna tuning IC, an envelope tracking (ET) IC for Qualcomm’s PA and a MM-MB CMOS PA fabricated using a silicon-on-insulator (SoI) substrate. This announcement sent stocks of the GaAs PA manufacturers plummeting to levels from which they are still trying to recover. Then at MWC, a whole host of companies announced their ET development efforts aimed at CMOS-based PAs in LTE handset applications. A detailed summary of these announcements and developments is contained in PA Market in Flux: CMOS PAs and Envelope Tracking Emerge as Major Themes at MWC 2013 from Strategy Analytics’ RFWC service.  

These events and particularly the development on the CMOS front will certainly influence the growth trajectory for GaAs devices in the next several years and merit close attention. If you plan to attend IMS2013 in Seattle, stop by the panel session I will be hosting entitled “The Death of GaAs (?)” on Thursday, June 6^th at 12:00PM. We’ve have some market overviews, short presentations from a number of GaAs and silicon-based device manufacturers and then a lively discussion. If you can’t make the IMS2013 conference, you can also catch up with me at CS MANTECH in New Orleans on May 13 – May 16. I’ll be presenting an overview of the 2012 GaAs market and I’d be happy to chat.

-Eric

As we get set to close the book on 2012, I thought I’d share some observations about the trends and results for the compound semiconductor industry. First and foremost, it hasn’t been a banner year, but the GaAs device market looks like it will eke out a small gain. Through three quarters, revenue in the device industry is showing a very small gain. On a positive note, many of the large GaAs device manufacturers have stated they are optimistic about their calendar fourth quarter prospects. This makes me optimistic the GaAs device industry will come close to the 2% growth I forecast at the beginning of the year. In addition, the GaAs revenue “pressure curve” (a concept I introduced in the “At the Halfway Point of 2012: GaAs Device Industry Shows Small Gain “ blog) has shown an upward trend with a value greater than 1 the past two quarters. Essentially, the pressure curve is a rolling average, so a value greater than 1 indicates growth and with companies optimistic about Q4, it wouldn’t be surprising to see another upward tick in the indicator.

This indicator fits well with our latest forecasts. The inescapable conclusion is growth in the handset market is still the single largest driver for the overall GaAs device market. This “growth” isn’t just unit growth, it also relies heavily on smartphone penetration since these devices contain more GaAs content than lower tier devices. After a flat year in 2012, our latest forecasts show much healthier growth in handsets and power amplifiers in 2013. The unit growth will be important because as smartphones become more prevalent, the rate of growth is slowing. Return to healthy growth for handset PAs, which make up more than 50% of the overall GaAs device market, bodes well for growth in 2013.

Most of the growth in the GaAs device market in the last 18 months can be attributed to handsets, as the network side of the market has been flat. While a tentative global economy probably is not helping, the time for increasing network investment would seem to be nearing. Data consumption continues to increase dramatically and this is placing a burden on all the networks, whether they are wireless or wired. In the upcoming year, I plan to update research on the wired CATV/broadband and fiber transport networks, along with developments in the wireless backhaul, infrastructure and VSAT networks to get a better understanding of the trends and drivers in these areas, so stay tuned for those updates.

As a final thought, I’d be remiss if I didn’t mention GaN. This technology continues to attract a significant amount of interest in the compound semiconductor industry. It finally appears that we are getting commercial adoption of GaN-based devices and we can see the point of inflection for volume. CATV amplifiers continue to lead this commercial adoption, but we are hearing about more activity for GaN in wireless infrastructure, VSAT, high power electronics and even point-to-point radio applications. The tricky part is determining exactly where we are in relation to the point of inflection. I’m not completely sold on the hype (again), just yet, but I am willing to concede there is much more activity than a year ago. This is another topic that I will be diving into early in 2013 to get a better sense of the market.

As I sharpen my pencil for 2013, I’d like to wish everyone a very safe and happy holiday season and a prosperous New Year!

-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

I recently posted the results and forecasts for the GaAs epitaxial substrate market. The Excel data model is entitled "GaAs Epitaxial Substrates 2011-2016" and the accompanying Forecast and Outlook report is "Markets for Semi-Insulating GaAs Epitaxial Substrates: 2011 - 2016". Our survey results indicate GaAs epitaxial production saw a small (between 2-3%) gain in 2011. This small gain was the result of opposite trends in the two major epitaxial processing techniques, however. As I have been reporting, the demand for pHEMT devices dropped significantly, decreasing by nearly 7% in 2011. The primary reason for this appears to be several large GaAs device manufacturers converting from GaAs to silicon-on-insulator for handset switches. An increase of about 9% in MOCVD processed wafer demand was able to offset the decline in MBE wafer epi and the overall market rose slightly. MOCVD wafers are closely associated with HBT devices used for handset PAs and this underscores the important role these types of devices play in the overall GaAs device market.

Despite the small increase in epitaxial wafer demand, the market revenue grew by almost 20% to nudge jsut past $600 million. The supply chain disruption that spiked pricing in the GaAs bulk substrate market also seemed to have had the same effect on the epitaxial wafers. This price increase is likely a one-time event and epi wafer pricing will return to a more typical price reduction curve starting this year. This, coupled with the slow growth period the entire GaAs market will be in for the next several years will lead to a declining market value through 2016.

The good news is there will be slow growth in device, epi and substrate demand, fueled primarily by handset growth in general and the continued penetration of smartphones. Driven by handset growth, it is not surprising that we believe MOCVD wafer production will increase through the forecast period. What may be surprising is I expect MBE wafer demand to also increase, albeit at a much slower rate than the MOCVD production. I think most of the transition from GaAs to silicon-on-insulator has already taken place and it is unlikely that excess MBE process capacity will remain idle. I think it is far more likely that this MBE and pHEMT capacity will be re-tasked to other high performance markets and this will create the opportunity for some growth.

-Eric

With many of the major GaAs devices manufacturers reporting calendar Q2 results, the GaAs market revenue picture is beginning to sharpen. There is both good news and bad news, so let's start with the good news: it appears the overall GaAs market is managing to eke out growth in the 2% range for the first half of 2012. A small gain, to be sure, but I think the still uncertain global economy has put thoughts of double-digit GaAs device growth to rest.

The bad news is this growth appears to be narrowly-based, at least at the top tier of GaAs device manufacturers. GaAs device lmanufacturer Skyworks and pure-play foundry  WIN Semiconductors both seem poised to strengthen their leads with strong growth. Avago has reported overall revenue growth in the first half of 2012, but their products and technologies are so varied that more scrutiny is needed to tease out the GaAs content from these top-level results. After these three, many of the other top GaAs device manufacturers, like RFMD, TriQuint, ANADIGICS and Hittite have reported year-over-year revenue declines for the first half of 2012. IT's also interesting that the companies that are doing well seem to have found the "formula" because their outlook for the rest of 2012 is relatively optimistic and they expect to continue to see revenue growth. As a positive note, many of he companies that have been mentioned also see brightening market prospoects in the second half of 2012, but many still seem to be forecasting year-over-year revenue declines. I'll be monitoring this to sort out these developments.

The drivers for GaAs, data consumption and increasing smartphone/feature phone penetration and GaAs content are still firmly in place, but there are challenges for GaAs on the horizon. The uncertainty in the economy, especially in Europe is dampening enthusiasm at operators to spend money on network infrastructure and with consumers to buy or upgrade to the latest gadget. There continue to be great strides made by silicon-based technologies into functions previously dominated by GaAs prosucts. The GaAs industry considers the calendar Q3 as it's best as consumer electronics manufacturers ramp up for the holiday season, so the performance during the next quarter will go a long way to clarifying the overall picture for 2012.

I'll leave you with a great visual tool that a colleague of mine uses. She calls the chart linked below a "pressure curve". It represents performance of a data point versus a moving 4-quarter average for a particular metric. In this case, I've plotted a representative pressure curve of a sample of GaAs device manufacutrer revenue since the midway point of 2009. If a point has a value of "1", it is exactly the same as the average of the preceding 4-quarters. Fromn the graph below, it is easy to see the big revenue ramp that closed 2009 and held through most of 2010. We can also see that even with growth in the first half of 2011, the rate was lower and we see the peak in Q3 and subsequent decline. Now, one quarter does not define a trend, but as we come to the close of what has historically been a growth quarter, we can perhaps be a bit optimistic that the GaAs insustry will manage to hold onto and hopefully expand the gains we've seen in the first half.

-Eric

  Pressure Curve.png (60.88 kb)

I have just released our latest GaAs bulk substrate market updates. The data model, “SI GaAs Substrates Markets: 2011-2016” and the Forecast and Outlook,“Semi-insulating GaAs Substrate Markets: 2011 – 2016” show that slow growth in the GaAs device market in 2011, coupled with a shift away from GaAs technology for handset switches dropped demand for semi-insulating GaAs bulk substrates by 4%. The other major driver for the GaAs bulk substrate market in 2011 was the devastating earthquake and tsunami that hit Japan. With so much of the supply chain located in this region, the accompanying disruption seems to have raised substrate prices and the overall market value as a result.

This certainly is not how you hope to see revenue growth in a market and this set of circumstances will be short-lived as the Japanese people continue working diligently to restore the country back to “normal”. The supply chain disruptions seem to have largely settled out and I expect the market to revert to slow growth and a more traditional price erosion curve beginning this year. I am optimistic the GaAs bulk substrate market returns to growth in 2012 because GaAs device manufacturers are seeing some growth in revenue and demand and most of the conversion of handset switches to SoI has already taken place.

The survey results indicate demand for GaAs bulk substrates reached slightly more than 32100 ksi in 2011. Even though the demand dropped by 4%, the market value increased by 12% to reach nearly $230 million. This revenue increase appears to be a singular event tied to the earthquake and tsunami aftermath. My forecast indicates demand and revenue will return to slow growth with demand reaching nearly 39000 ksi and revenue growing to slightly more than $240 million by 2016.

Eric