Industrial electronics market rakes in higher revenues
Stronger business conditions across the global economy have sustained the recovery of the industrial electronics chip sector, which posted a revenue of $8.61 billion in this year's first quarter, according to the latest IHS Industrial Semiconductor Market Tracker report.
The numbers represented an increase of 17.5 per cent from the first quarter of 2013, and 0.6 per cent from the fourth quarter of 2013. Although growth was less than 1 per cent sequentially, the sector still managed to post a gain during what is considered the weakest period of the year.
"It is broad-based growth, and a lot of factors are driving it," says Robbie Galoso, principal analyst for industrial electronics at IHS, who cited strong demand from the medical, LED lighting, imaging machines, factory automation, and commercial aircraft markets in all major geographies.
"A lot of different countries are growing in industrial from Europe to Japan, as well as the US and China, and also many different applications are growing. It's a recovery," he says. For example, China's manufacturing base is increasingly retrofitting its factories with energy-efficient motor drives. In the US, avionics companies are designing commercial aircraft and air-data test systems with more sophisticated electronics.
As these trends continue, the industrial electronics chip market is expected to cap off 2014 with $35.42 billion in revenue, a 9.4 per cent jump from $32.39 billion last year. In 2013, the market grew 8.8 per cent following a 5 per cent loss in 2012.
But of all the growth markets, LED lighting will be the major catalyst driving robust industrial electronics chip sales over the next four years, he says. Consumers are increasingly switching from incandescent lighting to LEDs as price points come down. Today, the LED lighting penetration rate is only 10 per cent, but expected to grow sharply, he adds.
However, the major players in LED lighting chips, including Cree, Nichia and Philips Lumileds, struggled in the first quarter of this year due to "normal seasonal pressures," according to the report. The chip companies that benefitted from the industrial electronics boon include Texas Instruments, Analog Devices, Maxim Integrated Products, and Microsemi, according to the report.
"[Both OEMs and chip] companies are really focusing their R&D on industrial. They are taking their resources from data processing or wireless applications, and they are putting their money in industrial," Galoso says.
Texas Instruments, for example, has identified industrial as one of the fastest growing semiconductor markets, and focused its product analogue and embedded processing chip strategy on serving it. In the first quarter, TI reported broad-based growth in such areas as motor drives in factory automation, according to the report. Meanwhile, Analog Devices Inc. posted higher-than-expected sales to the industrial sector, particularly from instrumentation applications as well as energy and military.
Analog chipmaker Maxim Integrated reported strong medical electronics growth in low-power and portable patient-monitor devices, while Microsemi rebounded with revenue derived from electronic-oriented aircraft such as the Boeing 787 and Airbus A350.
Geographically, the US, China, Japan, and Germany accounted for 71 per cent of total industrial electronics chip sales. The US, however, was the leader with nearly one-third market share, but could face growing competition from China in subsequent years, according to Galoso.
- Ismini Scouras
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