Santa Clara, Calif. – Sensors are expected to provide the strongest sector growth opportunity for the semiconductor industry in 2015, according to the annual Global Semiconductor Industry Survey from KPMG LLP, the U.S. audit, tax and advisory firm. Sixty-one percent of survey respondents predict sensors will provide the biggest opportunity for growth next year. Other big growth drivers include big data and medical applications.
Sensors are a key to automotive technology applications (see video), touch screens, wearables and the Internet of Things, said KPMG. "Competition in the industry has never been more intense as the bar is raised constantly for new product introductions and the time to market for each new design is consistently compressed," said Packy Kelly, KPMG Global Semiconductor Practice leader, in a statement.
Case-in-point: Texas Instruments (TI) recently claimed the industry’s first flexible high frequency 13.56 MHz sensor transponder family, targeting industrial, medical, wearables and Internet of Things (IoT) applications. The highly integrated ultra-low-power RF430FRL15xH system-on-chip (SoC) family combines an ISO 15693-compliant near field communication (NFC) interface with a programmable microcontroller (MCU), non-volatile FRAM, an analog-to-digital converter (ADC) and SPI or I2C interface. The NFC sensor transponder is optimized for use in fully passive (battery-less) or semi-active modes to achieve extended battery life in consumer wearables, industrial, medical and asset tracking applications.
Growing Optimism for 2015
Overall, the survey of 155 semiconductor industry business leaders finds that most are optimistic about the business environment for 2015. The KPMG Semiconductor Industry Confidence Index increased slightly to 59, compared to 57 a year ago. “A value above 50 is considered an optimistic outlook on the business environment for the next 12 months. The index is based on survey responses to questions on revenue, profitability, workforce, capital spending and R&D investment,” said KPMG.
However, survey respondents are mixed about when the industry will see an expansion next year or whether it will expand. The results: Thirty-seven percent expect the industry cycle will be in a late expansion stage in 2015, 36 percent said early expansion stage, 19 percent believe the industry will move from expansion to contraction, and 8 percent said the industry is no longer cyclical.
An interesting result, reports KPMG, is more U.S. respondents (43 percent) believe there will be a late expansion stage, while more Asia Pacific respondents (38 percent) said there will be an early expansion stage.
"Last year's predictions for accelerated growth have largely been fulfilled, but consistently lower revenue guidance for the fourth quarter of 2014 emerged as we were conducting this survey, and that has affected results" said Gary Matuszak, global chair of KPMG's Technology, Media and Telecommunications practice, in a statement. "The lower guidance has clearly held down a more meaningful increase in the 2014 confidence index and lowered growth expectations for 2015."
Global semiconductor revenue is forecast to reach $338.0 billion in 2014, up 7.2 percent from 2013, according to Gartner Inc. Analysts remain bullish on 2014 consumer demand.
The outlook for industry profitability and company revenue growth over the next year and next three years was similar across the board, reports KPMG. Greater than 80 percent of the respondents expect an increase, up from less than 80 percent a year ago, though lower growth rates are expected.
"The semiconductor industry faces a myriad of challenges, including accurately forecasting demand, investing in the right new market opportunities, managing the higher development costs of more integrated solutions and navigating increased competition in China," stated Kelly. "How semiconductor companies address these challenges will help determine whether 2015 is another record year."
In addition to sensors driving growth next year, several end markets including medical (66 percent) and networking and communications (62 percent) are projected to deliver the strongest growth opportunity in 2015, according semiconductor executives. Some of the biggest application drivers include cloud, big data, and wireless/mobile. However, the survey finds that several emerging applications, led by robotics, big data and automotive sensors, will be key markets over the next three years. Other important markets include cloud, medical imaging, biometrics/security and wearables.
The biggest challenges faced by semiconductor companies over the next three years include R&D costs (43 percent), achieving technology breakthroughs, such as those resulting from Moore’s Law, (37 percent), and high cost for plant and equipment (32 percent).
The survey also reveals a higher uncertainty as to when the shift to 450-mm wafers will happen. More than 4 in 10 said 450-mm wafer production will have a greater impact on the industry than production at a sub-20-nm technology node, reports KPMG. In comparison to last year, 54 percent said the transition to 450-mm wafers will occur between 2015 and 2018, while 39 percent thought it more likely to occur in 2017-2018. In 2013, 63 percent believed the transition would occur by 2018.
The survey also finds that the U.S., China and India will continue to be the most important markets for revenue in 2015 and in three years. Six out of 10 indicated the U.S. was the most important end market for revenue in 2015, 55 percent said China, and 43 percent said India for 2015. Findings were similar when looking at revenue markets in three years, said KPMG.
The U.S., China, and India also were selected as the top three markets for expansion in workforce numbers, according to 70 percent, 64 percent, and 42 percent of respondents, respectively.
Semiconductor-related capital spending will increase in the next year, according to 83 percent of respondents. Twenty-two percent expect an increase of greater than 10 percent, compared to 12 percent last year. Similarly, 82 percent of respondents expect semiconductor-related capital spending to increase in three years. Twenty-six percent of respondents expect an 11 percent or greater increase compared to 18 percent last year.
For semiconductor-related R&D spending, more than eight out of 10 expect spending to increase in the next year. Compared to last year, fewer respondents project six to 10 percent growth, and more expect one to five percent growth.
Despite several acquisitions in the semiconductor industry over the past year including Qualcomm’s purchase of CSR, Infineon’s acquisition of International Rectifier, and On Semiconductor’s purchase of Aptina, fewer semiconductor executives expect more merger and acquisition deals next year. Two-thirds expect an increase in the number of merger and acquisition deals next year, compared to 73 percent last year.