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

I attended the recently concluded SCTE Cable-Tec Expo and came away impressed with the amount of system and component development activity in this industry. What started as a solution for homes that could not get adequate over-the-air broadcast TV signals, has become intertwined with cable-based broadband data services as service providers look to capture an increasing share of the “triple-play” of voice, video and data. The lines of distinction among the service providers is also getting blurry as traditional voice operators like AT&T and Verizon in the US offer broadband and TV services and cable operators like Comcast and Time Warner Cable offer broadband and VoIP voice services, in addition to the traditional TV offerings

The convergence of triple-play services also brings the challenge of designing networks that are scalable enough to deal with the explosion of data consumption. Several of the presentations referenced “the Nielsen Curve” that plots the maximum downstream data rate over time. This curve shows a very steady 50% yearly increase from the 300 bps performance in 1982 to 12Mbps in 2007. A couple authors were arguing that we are now in an era of “wideband” cable modems and the data rates have actually been increasing faster than 50% for the past few years!

There are several ideas about the proper architecture (or mix of architectures) required to handle this 50% (or higher) increase in downstream data rates that is being fueled by video, higher internet data speeds and more TV channels. The other aspect of the architecture challenge is what to do about the return or upstream signal. As user experience becomes more interactive, the data requirements increase on the upstream path, as well.

The new architecture ideas include running fiber as deep into the network as possible. While this solves the bandwidth problem, several of the large MSOs pushing this approach are having a hard time making the business model work, despite healthy numbers of subscriber additions. Networks that use EPoC (Ethernet PON over Coax) and DPoE (DOCSIS Provisioning of EPON) offer transport advantage over more traditional HFC networks without the cost of “fiber deep”. The industry is discussing changing the traditional 5-42 MHz return path bandwidth and in what portion of the spectrum to locate this additional bandwidth. In conjunction with this discussion invariably comes the discussion to extend the band to 1.2 GHz, from thecurrent1GHz (or below) physical plant. Finally RFoG (RF over Glass), where RF signals are transported over fiber (allowing the MSOs to maintain much of their HFC headend and back office equipment is still being touted as a viable option. Also in the mix are network concepts like SDV (switched digital video), node-splitting and hybrid gateways.

So, there are many options available to get to a stated goal of 2.5Gbps downstream and 1Gbps upstream cable data rates. There were a couple of presentations that did modeling to show that with the proper mix of existing technologies (node-splitting, SDV, hybrid gateways and the appropriate phase-out of analog channels), operators can accommodate the expected high-speed data, video-on-demand, HD and IP video) for the next decade with a 1 GHz physical plant! The dilemma for operators and equipment manufacturers is to determine the appropriate mix to satisfy their particular mix of SD, HD and analog TV channels, as well as accommodating broadband data rates and planning for DOCSIS3.1 and the eventual move to an all-IP network: a difficult choice indeed!

However, other than making for a dynamic environment in an industry known mostly for stability, why do we care? How the architecture discussion plays out will have major implications for compound semiconductor opportunities in this market segment. As fiber goes deeper into the network, whether this is directly through fiber to the premises deployments or increasing use of PON architect, fewer RF components may be required. Advances in GaN technology by companies like ANADIGICS, RFMD and TriQuint may also limit the compound semiconductor opportunity in this market. In addition, how does the industry answer the frequency split/extension question? Many of the return path products are designed to meet the 5-200 MHz option being discussed and the downstream path components routinely have bandwidth above 1 GHz different solution will create more development work.

Stay tuned for more in-depth analysis of this market and I do look forward to the days of 2.5Gbps downstream data rates!

-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

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 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 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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