Another year draws to a close and we take a moment to catch our breath, take stock of how the electronics business has emerged from 2005 and plan for 2006. While some segments of the industry haven't quite recorded explosive growth, it's been a good year. The big changes have less to do with sheer numbers than with shifting industry focus: from infrastructure and enterprise markets to consumer electronics; from analog to digital and clear product segmentation to 3C convergence; and from the North American market to Asian markets.

The Semiconductor Industry Association (SIA) forecasts global semiconductor sales to grow at about 9.7 percent CAGR from 2005 to 2008, reaching $309 billion in 2008. The SIA forecasts for semiconductor categories put DSPs growing at 13.9 percent CAGR ahead of all other products. These are followed by MOS logic at 12.6 percent CAGR; Flash memory at 12.5 percent CAGR; optoelectronics at 11.1 percent CAGR; microprocessors at 10.9 percent CAGR; analog semiconductors at 10.5 percent CAGR; microcontrollers at 5.8 percent CAGR; discrete semiconductors at 4.6 percent CAGR; and DRAM at 3.8 percent CAGR.

In terms of geographical markets, the Asia-Pacific ex-Japan leads growth potential with the SIA expecting 14.1 percent CAGR from 2005 through 2008—from $88.8 billion in 2004 to $150.4 billion in 2008. The Asia-Pacific is followed by the Americas at 6.9 percent CAGR, Europe at 6.7 percent CAGR and Japan at 5.5 percent CAGR. Asia's share in the market is predicted to grow 7 percentage points to 48.6 percent, while all other regions see a declining share.

SIA President George Scalise issued a statement mid-November that while IT products would continue to be the largest market sector for semiconductors, consumer products would be the major growth-drivers. The fastest-growing segments next year, according to SIA, are DTVs with a forecasted unit growth of 52 percent; MP3 players at 52 percent; cellphones at 13 percent; PCs at 10 percent; and digital cameras at 9 percent.

Echoing SIA's sentiments, market research firm Databeans Inc. said in a recent statement that the consumer electronics market has departed from showing historical linear trends to grow exponentially. Databeans estimates that consumer semiconductor revenue in 2004 was $42.7 billion, or about 20 percent percent of the entire $214 billion semiconductor market. Growing at 12 percent each year on average, the consumer market should constitute 22 percent at nearly $81 billion by 2010.

Consumer electronics is indeed pulling up sales in the industry and the impact on other segments is telling. Take, for instance, HDD sales. According to market research firm In-Stat, consumer electronics will drive growth in this segment as well. In 2004, shipment of HDDs into this market segment reached 40 million units and is expected to grow to about 240 million units in 2009. In-Stat reports that significant growth may come from portable products like PDAs, digital camcorders and cellphones. In another report, the research firm predicts that unit sales of consumer network storage will grow by more than 50 percent over the next several years.

We look at some of these trends and challenges more closely in EETimes-Asia's first issue of 2006. The Technology Outlook section presents developments straight from the senior management at leading semiconductor and EDA companies. Based on interviews and analyst contributions, this section is your crystal ball into the future of electronics.

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