Sensor/Actuator Price Erosion Eases; Analog, MCU Prices Up

After a long spell of severe price and margin erosion, component makers are successfully increasing prices across a wide range of devices. The sensor/actuator market ended four straight years of declining prices in 2016, reported IC Insights this week, with a 0.9 percent price decline vs. a 9.3 percent drop during 2012-2015. Analog and MCU prices are increasing, according to a Morgan Stanley Research report, and some IP&E pricetags are also higher.

The market for semiconductor sensors and actuators finally caught fire in 2016 with several of its largest product categories—acceleration/yaw and magnetic-field sensors and actuator devices—recording strong double-digit sales increases in the year, according to IC Insights’ 2017 Optoelectronics, Sensors/Actuators, and Discretes (O-S-D) report. Worldwide sensor sales grew 14 percent in 2016 to a record-high $7.3 billion, surpassing the previous annual peak of $6.4 billion set in 2015, when revenues increased 3.7 percent. Actuator sales climbed 19 percent in 2016 to an all-time high of $4.5 billion from the previous record of $3.8 billion in 2015.

IC Insights credits increased demand for surging sensor/actuator sales. “Substantial unit-shipment growth in sensors and actuators continues to be fed by the spread of intelligent embedded control, new wearable systems, and the expansion of applications connected to the Internet of Things,” according to the 2017 O-S-D Report.

MLCCs, analog, MCUs, connectors

In other component categories, some suppliers are facing capacity constraints, which in turn is impacting pricing. TDK recently informed its resellers that it’s adjusting prices as it restructures its MLCC business. A Morgan Stanley survey of distributors found 44 percent of respondents seeing "stronger than usual" pricing for analog components in March quarter, up from 36 percent in December quarter. Similar to analog, 25 percent of respondents are expecting stronger MCU pricing (up from 11 percent) while 13 percent expect weaker pricing (down from 18 percent).

Meanwhile, the Morgan Stanley survey found connector pricing ticked up slightly, with 15 percent of respondents expecting pricing to increase (up from 13 percent last quarter), while 8 percent expected pricing to grow.

Leadtime extensions are also causing concern. Overall, leadtimes are still manageable, said Morgan Stanley, but 68 percent of respondents saw leadtimes extend (up from 49 percent in Q4) in areas such as memory, FPGAs, analog, and passive components. Sixty-three percent of respondents (up significantly from 37 percent in December quarter) saw expedite activity in memory, FPGAs, connectors, analog, discretes, and sensors. Of note, respondents this quarter also saw a slight pickup in double ordering (10 percent vs 0 percent last quarter) and push outs (12 percent vs 8 percent last quarter). “We have not seen these cyclical effects in multiple years, and is something we plan to monitor in the coming quarters, though leadtime extension is likely to continue to drive increased short term business confidence,” according to the report.

As the supply chain has increasingly adopted lean inventory management, the volume of components in the pipeline has decreased. Electronics distributors are the main repositories of high volumes of inventory. Global distributor Arrow Electronics Inc., during its Q1 2017 conference call with analysts, reported it is increasing inventory levels. “Entering the second quarter, the percentage of customers saying they did not have enough inventory was at the highest level since 2010," said Michael Long, CEO of Arrow. "The percentage of customers saying they had too much inventory was at the lowest level in over 10 years. We've taken all appropriate steps, including taking on inventory, to assure our customers get the parts they need.”

IC Insights forecasts total sensor sales will increase by a compound annual growth rate (CAGR) of 7.5 percent in the next five years, reaching $10.5 billion in 2021, while actuator dollar volumes are expected to increase by a CAGR of 8.4 percent to nearly $6.8 billion in the same timeframe. Strong 2016 sales recoveries occurred in acceleration/yaw-rate motion sensors (+15 percent), magnetic-field sensors and electronic compass chips (+18 percent), and the miscellaneous other sensor category (+20 percent) after market declines were registered in 2015. Sales growth also strengthened in pressure sensors, including MEMS microphone chips, (+10 percent) and actuators (+19 percent) in 2016. The new O-S-D Report forecasts sales of acceleration/yaw sensors growing 9 percent in 2017 to about $3.0 billion, magnetic-field sensors (and compass chips) rising 8 percent to nearly $2.0 billion, and pressure sensors increasing 8 percent to $2.7 billion this year. Actuator sales are projected to grow 8 percent in 2017 to about $4.9 billion.

About 82 percent of the sensors/actuators market’s revenues in 2016 came from semiconductors built with microelectromechanical systems (MEMS) technology—meaning pressure sensors, microphone chips, acceleration/yaw motion sensors, and actuators that use MEMS-built transducer structures to initiate physical action in a wide range of devices, including inkjet printer nozzles, microfluidic chips, micro-mirrors, and surface-wave filters for RF signals. MEMS-built products represented 48 percent of total sensor/actuator shipments in 2016, or about 9.8 billion units last year.

MEMS-based product sales climbed 15.4 percent in 2016 to a record-high $9.7 billion after rising 5.1 percent in 2015 and 5.8 percent in 2014, IC Insights said. Some inventory corrections and steep ASP erosion in MEMS-built devices have suppressed revenue growth in recent years, but this group of products—like the entire sensors/actuator market—is benefitting from increased demand in new wearable systems, IoT, and the rapid spread of intelligent embedded control, such as autonomous automotive features rolling into cars. MEMS-based sensors and actuator sales are forecast to rise 7.9 percent in 2017 to $10.5 billion and grow by a CAGR of 8.0 percent in the 2016-2021 period to $14.3 billion, according to the O-S-D Report.