The average semiconductor cost in smart meters used for two-way communications between meters and utilities was about $11 in 2014; however, average selling prices (ASPs) are expected to increase as the industry needs to move to 32-bit microcontrollers (MCUs), memory chips, and single system-on-chip (SoC) solutions, according to IHS Inc.
The smart meter market is expected to provide big growth opportunities for semiconductor manufacturers, including microcontrollers and analog ICs. The smart meter market is estimated to grow from $11.1 billion in 2014 to $18.2 billion by 2019, at a compound annual growth rate (CAGR) of 10.2 percent over the forecast period, according to a report released by MarketsandMarkets. This also translates into growing demand for communication networks, advanced sensors, and monitoring devices, which are required by utility companies in combination with the smart meters.
The result is a healthy growth rate for semiconductors used in water, gas and electric meters. Global revenues for semiconductors used in these meters reached $1.2 billion in 2014, with a year-over-year growth of 11 percent and a five-year CAGR rate of eight percent, according to IHS.
The IHS Industrial Semiconductor Market Tracker finds that the demand for precise energy measurement and communication has increased the adoption of micro-component ICs and analog ICs. According to IHS two thirds of semiconductor revenue for meters comes from microcontroller and analog components.
“The semiconductor industry for electric meters is moving toward a single-chip solution for measuring and communicating with the grid station, which is an important industry trend to watch,” said Robbie Galoso, associate director, semiconductor market shares and industrial electronics for IHS Technology, in a statement. “Water and gas meters require fewer semiconductor components; however, they need extra semiconductors for sensing and battery management.”
IHS analysts expect the increased usage of semiconductors will come during the latter half of the decade as metering applications become more complex and there is a demand for better security, improved communications, enhanced remote control and higher resolution.
“That means increased need for memory and system-on-chip (SoC) solutions with greater capabilities in a smaller package than in the past,” said IHS.
“The movement from 8-bit MCUs to higher margin 32-bit MCUs is a key industry trend,” said Noman Akhtar, analyst for IHS Technology, in a statement. “The integration of these higher function microcontroller units also requires additional capabilities, such as increased memory, which further increases manufacturing costs.”