Price erosion isn’t new to the components industry, but one analyst predicts power ASPs will continue a trend of “strong” price erosion that began in 2015.
High production volumes in 2015 set the power electronics industry on the road toward price erosion, according to Yole Développement. Last year also saw China expand its role in power electronics industry and the impact of consolidation among two major players: Infineon Technologies and International Rectifier.
Most indicators were pointing to 2015 as a recovery year, Yole said in its Status of the Power Electronics Industry 2016 report. However, the global value of power ICs, power modules and discrete components decreased from $15.7 billion in 2014 to $15.2 billion in 2015. This 3 percent decrease is mainly due to the strong ASP decrease at the IGBT module level. “We expect this ASP trend to continue, mainly because of price pressure from the automotive market,” explains Coralie Le Bret, technology & market analyst at Yole. “But overall IGBT module and global power electronics market value should increase, as volume growth outweighs this ASP fall.”
The automotive market is expected to strengthen its position in power as Yole expects the EV/HEV market segment to represent a major part of the IGBT module market by 2021. Over the same time period the power MOSFET market is expected to grow slightly for all applications, going from $1 billion to $1.2 billion.
Yole’s analysts project two different scenarios for the power electronics market depending on the future of electrified vehicles. Many applications—such as renewable energies and electrified vehicles — depend on political decisions. According to Yole’s nominal scenario, the power electronics market will reach $27 billion by 2030; with a more pessimistic approach, such figure will be totally different.
From the technology side, the evolution will mainly be driven by EV/HEV sector, as it is considered the main power electronics market for the future. Power density increase is the main focus as it induces thermal management challenges that need to be overcome. Overmolded modules and double side cooling seem to be the future for mainstream applications, especially for mid-power applications demanding low price. Module designs may evolve, removing layers of the package in order to optimize thermal management.
Another trend identified by Yole’s analysts is focused on WBG technologies. According to Yole, the adoption of WBG solutions will be generalized: most players are already offering off-the-shelf devices and are involved in different R&D projects. “WBG devices are used in some applications thanks to the high energy density they offer and their efficiency,” asserts Le Bret. “In the future we expect multi-sourcing and price decreases to favor the WBG materials penetration. Packaging will have to be developed in accordance with the device in order to take [advantage] of it.”
Infineon leads the power market
The market slowdown impacted most industry players who saw a reduction of their power electronics revenue. Nevertheless, some companies managed to increase their revenues between 2014 and 2015. The most impressive growth is Infineon’s, whose power electronics revenues for the first complete year of corporate activities since its acquisition of International Rectifier went up 20 percent year-on-year. The group now firmly leads the power electronics industry, when taking into account power transistors, diodes and modules.
Chinese companies are concerned by this landscape evolution, especially as they try to capture added-value and master the overall power electronics manufacturing process. During just the first five months of 2016, two companies from China acquired European silicon wafer manufacturing companies. In addition to their acquisitions, Chinese players are also hiring experts and building their own fabs to manufacture power devices internally. This phenomenon may have a big impact on power electronics industry, as more than a third of the IGBT market is currently in China.
ON Semiconductor’s offer to acquire Fairchild by may go in the same direction, as Fairchild is strongly involved in the automotive field. Acquiring Fairchild would give the combined company easier access to the automotive market as Fairchild already has the necessary certifications.
The tussle for the acquisition of Fairchild between ON Semiconductor and the consortium of China Resources Microelectronics and Hua Capital Management shows that M&A for power electronics is now a tough battlefield. Expected consolidation in this landscape will surely bring contested deals and counter-offers as players seek to grow and compete on a level playing field, Yole concludes.