Economic recovery driving industrial chip market to 10% CAGR
The annual market for industrial semiconductor components will rise from $34.8 billion in 2013 to $55.2 billion in 2018, representing a compound annual growth rate over the period of 9.7 percent, according to IHS Technology.
Recovering economies around the world, increased capital spending by companies and growth in the United States and China are the cause of the steady growth in industrial chip sales, the firm said. In terms of applications factory automation, home control and commercial aircraft construction are driving demand, according to the Q4 2014 Industrial Semi Market Report from the IHS Semiconductors and Components Service.
In 2014 the industrial semiconductor was worth about $40 billion up 16.8 percent over the previous years total. Demand was especially strong for optical LEDs, which grew 23.4 percent, rising from $6.3 billion to $7.7 billion. Discrete power transistors and thyristors posted 13.4 percent growth, rising from $5.5 billion in 2013 to $6.3 billion in 2014.
Global annual industrial semiconductor market. Source: "Q4 2014 Industrial Semi Market Report,” IHS, Inc.
"Because of strong growth in the industrial segment, semiconductor companies are paying more attention to this market as more chips are being used in applications that did not previously use semiconductors," said Robbie Galoso, principal analyst for IHS, in a statement. "Growth in the industrial segment has also been buoyed by a gradual acceleration in the global economy, which continues to boost industrial equipment demand, especially from the United States and China," he added.
The US and China are two leading regions for industrial chip sales. The US accounted for 30.5 percent of all semiconductors used in industrial applications in 2013 while China is the second largest industrial chip buyer, purchasing about 14 percent of industrial semiconductors.
Next: LED demand shines
The US economy is broader based than other regions and real gross domestic product growth is expected to have reached 2.4 percent in 2014, and go on to 3.1 percent in 2015 and 2.7 percent in 2016. China’s economy runs hotter and is expected to chalk up equivalent growth figures of 7.3, 6.5 and 6.7 percent.
"A solid economy and robust industrial equipment demand will further boost sales of optical semiconductors, analog chips and discretes, which are the three largest industrial semiconductor product segments," said Galoso.
LED demand shines
Revenue from optical chips for industrial applications will grow from $8.6 billion in 2013 to $15.9 billion in 2018. The optical chip segment includes LEDs for general lighting, which represented 72 percent of the optical category in 2013, and will reach 78.4 percent in 2018.
Optocouplers used in motor drives in factory automation and energy distribution, conversion and storage, is the second biggest product category within optical integrated circuits (ICs).
Analog semiconductor revenue will increase from $6.7 billion 2013 to $9.9 billion in 2018, while discretes increase from $6.4 billion to $8.6 billion. The analog semiconductor segment includes voltage regulators and reference, data converters, amplifiers and comparators, and interface ICs, which are used in factory automation, motor drives, and energy conversion and storage.
Next: Growth drivers
Image sensors are the smallest category in the optical chip segment. These sensors are currently transitioning from charge-coupled-device (CCD) image sensors to complementary metal-oxide-semiconductor (CMOS) image sensors that are widely used in security cameras, medical imaging equipment and military devices.
Industrial semiconductors with the strongest compound annual growth rates from 2013 through 2018 will include logic semiconductors at 13.4 percent, optical semiconductors at 13 percent and sensors and actuators at 10.8 percent.
Logic ICs are widely used in automation, including programmable logic controllers, digital control systems and communication and networking that extend across various markets, machine vision, and military applications.
Growth drivers
"The robust growth in demand for industrial semiconductors over the next three years will be driven by a wide range of products and segments," Galoso said. "These products include 3D printers, factory automation products, commercial aircraft, LED lighting, digital IP cameras, climate control devices, renewable energy products, medical electronics and wireless application-specific testers.
Industrial 3D printers is a high growth category that will help drive industrial semiconductor usage in the coming years. It includes equipment used to manufacture objects through an additive process of laying down successive layers of material, until the entire object is created.
Avionics will continue to lead growth in the industrial segment. The commercial aircraft market offset the military aircraft market in the third quarter 2014. Total avionics revenue was expected to finish 2014 with 16.9 percent growth.
Led by China and the United States, the factory automation segment has grown over the past five quarters. The segment is forecast to reach 5.9 percent growth in 2014.
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