Smartphones to surpass PNDs in navigation market in 2014

EL SEGUNDO, USA: The days of supremacy for the Portable Navigation Device (PND) in the global navigation market are coming to an end with the rise in worldwide usage of GPS-equipped smartphones in the coming years, according to iSuppli Corp.

After several years of strong sales growth, PNDs will continue to lead the navigation market in 2009, with 114 million sets to be in use by the end of the year, compared to 57.8 million smartphones. However, by 2014, usage of navigation-enabled smartphones will rise to 305 million units, exceeding the 128 million PNDs that will be around by then.

The figure presents iSuppli’s forecast of global usage of PNDs and navigation-enabled smartphones. Please note that this figure presents the number of products in use instead of annual shipments.Source: iSuppli, USA

“Previously, smartphones were not seen as a threat to the dominance of PNDs due to mobile handsets’ poor battery life, unclear pricing structures and inferior interface,” said Danny Kim, global Location-Based Service (LBS) analyst for iSuppli. “However, as smartphone design moves forward, many of these issues have been or will be resolved, leading to increased market share for navigation applications on smart phones.”

New smartphone models are more suitable for use with navigation applications for a range of reasons, including the integration of GPS functionality, better usability, larger screens, built-in connectivity and most importantly, the flurry of applications being developed for smartphones. Other features boosting the smartphones’ utility for navigation include better microprocessor support, higher internal flash memory and improved battery life.

iSuppli believes that in 2011, nearly 100 percent of all smartphones shipped will integrate GPS functionality.

“These features will give smartphones similar feature sets as mid-range PNDs, making them more attractive to users,” Kim said.

Apps are everything
Another factor driving increased usage of smartphone navigation is the launch of high-profile navigation applications from TomTom and Navigon for the iPhone.

“These new applications will make the iPhone a better match for the PNDs, diverting attention from the portable navigation devices,” Kim said.

With TomTom’s announcement last week, Apple now has eight navigation applications for the iPhone—two off-board solutions and six on-board counterparts.

The initial reaction from iPhone users should be encouraging to the application suppliers.

Owing to the arrival of these applications, iPhone navigation users are expected to increase to 28 million in 2013, up from just 2 million in 2009, iSuppli predicts.

Rise and fall of the PND
The rise of smartphone navigation represents another milestone in the remarkable story of the PND.

The starting gun for the PND market was in 2004, when the product began exceeding all expectations in growth and popularity and continued to so for several years. The year 2009 marks the dividing line when sales expansion for the PND slows as the product moves from the growth phase to the maturity stage of its life cycle.

The two major PND vendors are expected to maintain very similar market shares in the PND space into 2013.

iSuppli forecasts that the number of TomTom and Garmin PNDs in use—based on a three-year life span—will not significantly change between 2009 and 2013. Any new growth in PND shipments is likely to come from the Asia-Pacific region, where past map coverage has been patchy but is improving.

Internet TV subscribers to rise by over 50 percent in 2009

EL SEGUNDO, USA: The global IPTV market withstood the worst of the worldwide economic storm during the last six months, putting it on track to achieve more than 50 percent subscriber growth in 2009, according to iSuppli Corp.

In the fourth quarter of 2008 and the first quarter of 2009, IPTV added 2.5 million and 2.3 million subscribers worldwide, respectively. Global IPTV subscribers are set to rise to 33.3 million subscribers at the end of 2009, up 56 percent from 21.3 million in 2008.

The figure presents iSuppli’s global IPTV subscriber forecast for the period of 2006 through 2013.Source: iSuppli, USA

“With the economy in the dumps and revenue growth from voice services having evaporated, global telcos are turning to IPTV to drive their growth,” said Lee Ratliff, senior analyst for broadband and digital home at iSuppli. “The good news is that this strategy is paying off, with IPTV subscribers and revenue rising.”

In 2010, IPTV subscribers will rise another 56 percent to reach 52 million. By 2013, the number of subscribers will double, reaching 115.6 million.

“With the huge numbers of subscribers signing on during the next five years, telcos are rapidly gearing up for IPTV and triple-play services, as well as working on how they can make them more attractive to current and future subscribers,” Ratliff added.

IPTV revenue is growing even faster than subscribers thanks to increasing ARPU. Revenues are expected to increase to $58.2 billion by 2013, with a CAGR of 44.4 percent from just $9.3 billion in 2008.

Regional growth untapped
At the end of the first quarter of 2009, nearly half of global IPTV subscribers, or 49 percent, were located in Europe.

Other regions, including North America and Asia/Pacific, are relatively far along in their IPTV deployment, but the subscriber growth opportunity is huge because these regions—including Europe—have an IPTV penetration of the telco broadband subscriber base of less than 15 percent.

This means there are ample opportunities for telcos to expand their business for the next five years and beyond.

But the next great IPTV frontier may be in the emerging markets of Eastern Europe, India, Russia and Latin America, where IPTV’s penetration of the telco broadband subscriber base is less than 1 percent. These regions will be slower to ramp up their subscribers due to limited broadband infrastructures and, in some case, regulatory issues.

Apple/Google spat represents opening shot in high-stakes wireless data battle

EL SEGUNDO, USA: Apple Inc.’s recent move to reject Google Inc.’s Google Voice software from its App Store represents an initial skirmish in the escalating battle among wireless operators, cell phone makers, and content developers and aggregators over who will control revenue generated by applications and data services, according to iSuppli Corp.

Google Voice is a free Voice-Over-Internet-Protocol (VOIP) application that provides no-cost phone calls in the United States along with a range of services, including call screening, voice mail with transcriptions and Short Messaging Service (SMS).

With Apple not giving a reason for rejecting Google Voice, speculation has been rife that the company’s wireless operator for the iPhone—AT&T—demanded the application’s denial, fearing it could erode its service revenue from iPhone subscribers.

Apple’s move, and the news following afterward that Eric Schmidt—chief executive officer of Google—would resign from Apple’s board, reflect changing circumstances in the global wireless industry due the rise of data applications and services for the new generation of smart phones.

“The explosive growth in wireless data service revenues, mobile applications and smart-phone device unit shipments during the past two years is spurring a dramatic shift for the global cell phone industry,” said Dr. Jagdish Rebello, director and principal analyst with iSuppli.

“Companies including Apple, Google, Nokia, RIM and Microsoft are trying to muscle in on the wireless carriers for a share of the lucrative and growing mobile premium content, service and application pies. Regardless of who wins, this battle will alter the balance of power in the mobile value chain.”

Global revenue for wireless data services, excluding messaging, is projected to grow by 26.2 percent to reach $87.7 billion in 2009. This follows 57.1 percent growth in 2007 and a 60.3 percent expansion in 2008 for total data revenue among the world’s wireless carriers.

iSuppli is forecasting that total data revenues of carriers worldwide, excluding messaging, will grow to approximately $188 billion by 2013. In contrast, total revenues for all services offered by the world’s wireless carriers will remain roughly flat at approximately $866 billion in 2009.

Mobile applications, such as those on Apple’s App Store, are key to stimulating the data service revenue growth.

“Clearly, mobile data revenue is key to the continued health of wireless carriers and the cell phone value chain in the future,” Rebello said. “In this battle, ownership of customers and who can monetize data services and applications are up for grabs.”

Apple’s rejection of Google Voice is a dramatic illustration of this fight for data revenues.

“By introducing applications and services that allow customers to make calls and send text messages without paying the operators, wireless operators have no incentive to invest in network upgrades,” Rebello said.

“This is the reason why many carriers are pushing out the upgrades of their networks to 2010/2011, compared to 2009/2010 before. With billions of dollars in expected investments, the stakes are huge for the wireless carriers.”

The figure presents iSuppli’s forecast of global wireless data revenue excluding messaging revenue.

iSuppli: Global Wireless Operator Non-Messaging Data Revenue by Country (Millions of US Dollars)Source: iSuppli, Aug. 2009

Wireless carrier success strategies
To sustain the growth momentum in data revenues while maintaining their relations with other players in the value chain, wireless carriers must develop and implement carefully thought-out business models. Operators need to develop strategies that are built around four central tenets:

* Monetizing broadband access.
* Co-operating with the mobile value chain to develop and offer compelling applications and content.
* Offering revenue-generating services that take advantage of mobility.
* Leveraging mature billing capabilities and inherent customer trust to develop new applications that can take the industry to the next level.

Specifically, it’s critical for wireless service providers to implement new strategies and to develop business models optimized for each of the different revenue opportunities in mobile broadband access, content and applications marketing and value-added service offerings

“Failure to do so will result in contraction in data and total revenues, excessive subscriber churn and a slowdown in market development,” Rebello warned.

Cell phone shipments return to growth in Q2

EL SEGUNDO, USA: Global shipments of cell phones in the second quarter climbed 4.7 percent compared to the first, marking the first sequential increase for the market since the third quarter of 2008, according to iSuppli Corp.

Worldwide shipments amounted to 265 million units in the second quarter, up from 253 million in the first.

“The moderate increase indicates the worldwide mobile handset market is bottoming out and now is returning to growth,” said Tina Teng, senior analyst, wireless communications for iSuppli. “Much of the growth was generated by two emerging regions: the Middle East and Latin America. Furthermore, several aggressive promotional campaigns boosted sales in North America, with regional shipments rising by 8 percent during the period.”

The rise in shipments is welcome news to a handset industry that has seen nine months of contraction. Shipments declined by 0.3 percent in the third quarter of 2008, by 2.6 percent in the fourth quarter of last year and by a stunning 16.4 percent in the first quarter of 2009. By the first quarter of 2009, shipments had fallen by 58.8 million units compared to before the downturn began in the second quarter of 2008.

Shipments are expected to rise by 6 percent 280.9 million in the third quarter and by 8.3 percent to 304.2 million in the fourth. Despite the quarter-to-quarter increases, annual shipments are still expected to contract by 9.9 percent in 2009, with the total for the year amounting to 1.1 billion units, down from 1.23 billion in 2008.

“The global economic downturn has had a particularly harsh impact on the worldwide mobile handset as declining disposable incomes dissuaded consumers from making non-essential purchases like upgraded wireless handsets,” Teng said. “The recession brought to an end eight consecutive years of annual shipment growth for cell phones, and will result in the first market contraction since 2001.”

Big handset makers get bigger
The world’s Top-5 handset suppliers dramatically outperformed the smaller players in the second quarter, based on a preliminary estimate from iSuppli. Combined shipments for the Top-5 brands rose by 12.1 percent in the second quarter compared to the first, while all other companies together experienced an 18.1 percent plunge.

However, among the Top-5 individual company performances vary dramatically, although the rankings for these companies did not change compared to the first quarter.

The best performance in the second quarter was posted by South Korea’s LG Electronics.

LG's mobile handset shipments rose to 29.8 million units in the second quarter, up 31.9 percent from 22.6 million units in the first quarter. Company market share rose by 2.3 points to 11.2 percent.

“LG strong performance in the second quarter was due to its success in emerging regions, including the Middle East and Africa,” Teng said. “The company also managed to orient its product mix to more profitable handsets including new touch-screen devices.”

Motorola stops the bleeding
Embattled handset brand Motorola Inc. in the second quarter managed to increase its shipments by 0.7 percent to 14.8 million units, up from 14.7 million in the first quarter. While Motorola still underperformed the market and lost share, the rise brought to an end three consecutive quarters of declines in shipments for the company.

“Motorola finally has put a stop to its shipment slide due to its improved performance in North America and Latin America,” Teng said. “With this increase in shipments, Motorola has managed to secure its No.-4 ranking in the market.”

Nokia expands its lead
“The No.-1 player, Nokia, has been defending its dominant position since the third quarter of last year due to rising competitive pressure from Samsung, which has been expanding its sales in Europe and in emerging markets,” Teng said. “The company also has faced rising competition from smart phone players including Research in Motion and Apple Inc.”

Nokia was able to gain 2.1 percentage points of market share in the second quarter, with its shipments rising to 103.2 million units.

Samsung Electronics Co. Ltd. remains on track to achieve its target of more than 200 million mobile handset unit shipments this year. The company’s refreshed product lineup allowed it to increase its shipments by 14.2 percent and its share by 1.6 points compared to the first quarter.

Sony Ericsson, however, had another disappointing quarter!

“The company is known for leveraging the brand strength from Sony and its mid- to high-end multimedia devices,” Teng said. “Sony Ericsson’s product portfolio has not been adequately aligned with the two fastest-growing segments: smart phones and ultra-low-cost handsets.”

Company shipments declined by 4.8 percent and market share dipped by 0.5 percent from the first quarter.

The figure presents iSuppli’s preliminary share estimates of the mobile handset market during the second quarter.Source: iSuppli, July 2009

China’s mobile handset market expands by 9 percent in Q1

EL SEGUNDO, USA: Driven by government stimulus programs and purchases for the Lunar New Year holiday, China’s domestic mobile-handset shipments in the first quarter of 2009, up 9 percent from 53 million units in the fourth quarter of 2008, paving the way for growth for the entire year, according to iSuppli Corp.

Sales of brand-name GSM-based mobile handsets amounted to 44 million units in the first quarter of 2009, compared to 42 million in the first quarter of 2008. Branded CDMA-based wireless phone sales reached 5.8 million units in the first quarter, up 200 percent from the same period in 2008. Domestic white-box handset sales amounted to about 8 million units during the same period, compared to 10 million in the first quarter of 2008.

iSuppli forecasts that China’s domestic handset market will amount to 238.9 million units in 2009, up 7.8 percent from 2008.

The figure presents iSuppli’s forecast of China’s domestic mobile handset market, based on unit shipments.

iSuppli: Forecast of China’s Domestic Handset Market Unit Shipments, 2009-2013 (Millions of Units)Source: iSuppli, June 2009

“The first quarter is typically strong for China’s mobile-phone market due to purchases made for the Lunar New Year Holiday in January,” said Kevin Wang, director, China research, for iSuppli.

“At the same time, shipments were further boosted by demand generated from China’s stimulus programs that encourage the purchasing of electronic products. Ongoing reductions in voice-service fees and declines in average handset selling prices will assure stable growth in China’s mobile subscribers during the next five years.”

The net addition of mobile subscribers for the nation’s three wireless operators—China Mobile, China Telecom and China Unicom—amounted to 20 million, 5 million and 4 million, respectively, during the first quarter.

Tianyu takes third rank in Q1
Local brand Tianyu in the first quarter surpassed Motorola to become the third largest mobile handset supplier in domestic sales. Nokia and Samsung remain the leaders in the domestic market, with market shares of 34 percent and 21 percent, respectively. Meanwhile, Motorola and Sony Ericsson have continued to lose market share during the past four quarters, while

local-brand OEMs such as Goinee and OPPO have continuously gained market share.
In terms of total handset shipments, ZTE in the first quarter became the largest Chinese handset OEM, with 7.2 million units shipped. Rival Huawei shipped 6.6 million handset units, putting it in the No.-2 position in the market.

Huawei, however, is the largest data card supplier in the world, and its data card shipments reached 5.1 million units in the first quarter this year. iSuppli believes that ZTE and Huawei will continue to grab market share from the international top five, especially in the developing countries.

Mobile phones get smart
With the introduction of 3G services in the country by China Mobile, China Telecom and China Unicom, 3G service brands dubbed G3, e-surfing and WO are being promoted by the Chinese telecom operators. At present, data cards and netbooks are the main products offered by operators for 3G service users, but iSuppli expects growth in the domestic 3G handset market to accelerate in 2010.

With smart phones lining up to become the hottest mobile handset products during the next two years, operators also hope to leverage smart phones to promote 3G services in China.

For its part, China Mobile has cooperated with local handset makers to develop an Android-based TD-SCDMA smart phone named OPhone. In a parallel move, China Unicom has joined the Open Handset Alliance (OHA), while most leading Chinese handset makers are developing smart phones based on the Windows Mobile or Android operating systems.

Digital mobile TV is one of the most popular features for mobile handsets. China Mobile and the State Administration of Radio, Film and Television (SARFT) will jointly promote TD-SCDMA terminals using the China Mobile Multimedia Broadcasting (CMMB) function in China. Beyond CMMB, Wi-Fi, GPS and NFC will become new popular features in China.

Palm Pre stands to shake up smartphone status quo

EL SEGUNDO, USA: Palm’s new Pre smartphone holds strong potential for robust sales growth, and may have a major influence on other platforms as well as the technology supply chain, according to iSuppli Corp.

Palm Pre shipments could amount to 1.1 million units in 2009. However, if Palm quickly introduces a new Pre that supports the 3G GSM standard, sales could rise to 1.3 million during the year. Furthermore, if Palm opens up the licensing of its webOS operating system used in the Pre, the software could have a wider influence beyond the company’s own products.

“Palm’s webOS appears to be superior to the Mac OS X used in the iPhone in the crucial area of multitasking capabilities,” said Tina Teng, senior analyst, wireless communications, for iSuppli. “This key point of differentiation, combined with the product’s multi-touch display, could be enough for Palm to carve out a significant share of the smartphone market.”

Another key allure of webOS is its use of widgets for accessing data and applications like the iPhone, rather than the folders used in Microsoft’s Windows OS. The consensus among most users appears to be that widgets provide a more intuitive interface than folders.

Because of this, there may be strong demand for webOS from other smartphone makers.

“If Palm decides to license webOS to other companies, it could follow in the footsteps of Google’s Android operating system, which is expected to expand its share of global smartphone operating systems to grow by nearly a factor of 12 from 2008 to 2010 according to iSuppli’s Design Forecast Tool (DFT) for Mobile Handsets,” Teng added.

This could lay the foundation for webOS to challenge Apple’s Mac OS X for leadership in the highly intuitive smart-phone operating system market.

Minding the store
Palm could further boost the prospects of webOS if the company opens an application store that sells programs that work with the operating system, similar to Apple’s App Store.

“An application store would make Palm a more complete solution provider to its end customers, allowing it to provide not only a hardware platform and operating system but also the programs essential to take advantage of the capabilities of a smart phone,” Teng said.

Teng noted that industry rumors have circulated since the Consumer Electronics Show (CES) in January that Palm will offer an online applications catalog. With the arrival of software allowing developers to produce programs that can be compiled to work on multiple mobile operating systems, Palm’s store likely will grow rapidly to sport a large number of applications.

Battle of applications processors
The potential long-term success of the Pre promises to benefit Palm’s applications-processor semiconductor supplier, Texas Instruments Inc. (TI).

While TI remained the leading supplier of standalone media/application/graphic processing chips for mobile handsets in 2008, No.-2 Samsung Electronics Co Ltd. is closing in on the lead, according to iSuppli’s Wireless Competitive Landscaping Tool (CLT). Samsung’s share of global market revenue rose to 16.4 percent in 2008, up from 10 percent in 2007. In contrast, TI’s share declined to 16.8 percent in 2008, down from 23 percent in 2007.

“Owing to rising shipments of the iPhone, which uses Samsung’s media processing silicon, the company is closing the gap,” said Francis Sideco, senior analyst, wireless communications, for iSuppli. “Pre’s success could help TI regain some of that share as Pre sales will help boost TI’s revenue for its OMAP line. It also will validate TI’s OMAP approach by demonstrating the need for powerful standalone applications processors in high-end smartphone devices.”

The table presents iSuppli’s market share estimates of global standalone mobile phone media processors.Source: iSuppli, June 2009

Display shortage?
The Pre likely makes use of a Low-Temperature Polysilicon (LTPS) LCD display, which offers superior picture quality compared to regular TFT-LCD panels used in most mobile phones.

This could put constraints on availability of LTPS LCD supplies, which is a popular display choice in the growing smart phone marker segment.

“If the Pre is successful and large volumes are shipped in the coming years, LTPS displays could go into shortage because the supply is limited to a few suppliers that operate smaller generation fabs capable of producing them,” said Vinita Jakhanwal, principal analyst, small/medium displays, for iSuppli.

In the palm of your hand
An iSuppli preliminary cost analysis of the Palm Pre released in late April revealed a total projected Bill-of-Materials (BOM) and manufacturing cost of approximately $170 for the product.

The estimated BOM consists of a hardware cost of $138, including the battery, nearly $10 for manufacturing and basic test costs, and a software and licensing cost of $23.

iSuppli produced this estimate of the Pre’s hardware and manufacturing costs based on second-quarter component pricing and assembly pricing from the company’s Mobile Handset Cost Model. An iSuppli cross-functional team also participated in developing the virtual teardown, including experts in memory, displays, baseband, component pricing, mobile handsets and wireless connectivity.

A full, physical teardown of the Palm Pre will be released by iSuppli early next week.

Rules change in mobile handset outsourcing business: iSuppli

EL SEGUNDO, USA: With the structure of the mobile handset supply chain upended by the global economic crisis, the old rules for the contract manufacturing of wireless devices have been overturned, leaving new pitfalls for OEMs and EMS providers, according to iSuppli Corp.

One major rule change is that the contract manufacturing business can no longer count on incremental growth in outsourced production from all wireless OEMs.

"Until recently, the contract manufacturing industry yielded consistent double-digit year-over-year growth rates in mobile handset outsourcing,” said Jeffrey Wu, senior analyst, EMS/ODM for iSuppli. “However, the uncertainty in the marketplace now is forcing some OEMs to not only decelerate outsourcing but also to reclaim production by moving it in-house. Nokia, for instance, is one such OEM."

In 2008, Nokia decreased the percentage of its outsourced manufacturing volume to 17.1 percent, down from 21.5 percent in 2007. The attached figure presents the balance of in-house and outsourced manufacturing at Nokia from 2005 to 2008.

“This reflects a larger trend in the mobile-handset supply chain,” Wu said. “Decelerating and decreasing outsourced manufacturing by those OEMs that are still operationally competent will hurt the growth prospects of contract manufacturers.”

Thus, as EMS and ODM providers mull their future strategies, they should not fall into the trap of assuming continued strong growth in production outsourcing among mobile-handset OEMs.

Vertical structure goes flat
Looking at another potential pitfall, the success of Foxconn International Holdings (FIH) in recent years has spurred other EMS firms to emulate the company’s vertical supply chain structure, including component procurement.

FIH’s extensive integration of various nodes of the supply chain into its operations often was credited as a key contributor to the company’s success and its rise to the leading position in the global EMS market. However, the halo surrounding FIH disappeared in 2008 and was replaced by a series of disappointing financial announcements.

"When the economy is going strong and market demand is vibrant, the vertically integrated model can help an EMS provider grow because the economies of scale can be leveraged internally, and the manufacturing business and the component business can subsidize each other," Wu said. "But when the order volume drops, this model doesn’t allow a lot of flexibility for the manufacturing arm and prevents it from sourcing to external component suppliers easily. Thus, the vertical integration model is like a double-edged sword, helping an EMS provider to compete better when the market grows, but making it suffer more when the economy stagnates."

Because of this, EMS firms may want to avoid the hazard of adopting FIH’s vertical structure amid the market downturn.

Motion sensors driving MEMS growth

In a recent report, iSuppli predicted that driven by new demand from consumer electronics (CE) and wireless applications, the global market for microelectromechanical systems (MEMS) will expand to $8.8 billion in 2012, up from $6.1 billion in 2006.

I caught up with Jérémie Bouchaud, Director and Principal Analyst, MEMS, iSuppli Corp., to find out more about the dip in the fortunes of the mainstay products and the latest trends in the MEMS market, especially, the significance of consumer electronics applications such as motion sensors for gaming, laptops and DSCs, and mobile handsets.

Will the mainstay products for MEMS actuators, inkjet heads and DLP chips, will lose market share? Or, is it a slight dip?

Jérémie Bouchaud says that MEMS actuators, include inkjet and DLP, and also RF MEMS switches. While selling prices stay constant, MEMS inkjet heads are losing shipments at a rate of 6 percent per year over the forecast period, so the market grows only slightly at 0.4 percent CAGR from 2006-2012.

DLP shipments continue to grow, but price erosion is running at 10 percent CAGR, which means that the market is shrinking at close to 5 percent per year to 2012. RF MEMS switches are the one bright spot that helps the market for this type of MEMS device to recover slightly in 2012. RF MEMS switches will grow at 100 percent CAGR over this time to top $260 million in 2012.

The new wave is partly founded in the rapid rise of consumer electronics applications such as motion sensors for gaming, laptops and DSCs, and mobile handsets. How much share are these segments likely to garner?

According to the analyst, all types of sensors in wireless communications and consumer electronics (inertial, pressure, microphones, filters, oscillators etc) exceed $1,5 billion: or 17 percent of the total MEMS market.

"Specifically, the motion sensing opportunity, including accelerometers and gyroscopes, for consumer applications like MEMS accelerometers for mobile phones (e.g., image rotation such as in iPhone and Nokia phones), gaming (Nintendo Wii, Playstation 3), etc., and gyros (mostly digital still cameras and camcorders, gaming like Playstation 3) will grow at over 20 percent CAGR from 2006 to 2012 to exceed $680 million, about 8 percent of the total market," he said.

iSuppli has also mentioned automotive as a key area for MEMS. What kind of growth does it see for automotive?

Bouchaud adds that automotive will grow at 8 percent CAGR to reach $2.1 billion in 2012, up from 1,3 billion in 2006. The market is largely driven by mandates for tire pressure monitoring, electronic stability control systems and reduced emissions, accelerating growth for pressure and inertial sensors.

So, will "new players have a chance to address a relatively open market", and if yes, what would those markets be?

Bouchaud indicates that the consumer electronics market is more open than the automotive sector, which features established, long-term supply arrangements, and production cycles lasting five or more years.

CE applications are characterized by fast time-to-market and short product lifetimes. For example, mobile phones that change yearly or even more frequently, and supply agreements satisfied by fast manufacturing ramp-up and ability to meet seasonal demand spikes, and often several suppliers in the same product, (e.g. ST and ADI in Wii). As sensor specifications are more relaxed than automotive, price and footprint are most decisive.

Will there be a growth in dedicated mass production facilities then?

According to him, several large MEMS players, e.g., STMicroelectronics, Freescale and Bosch Sensortec, have or are now invested in upgrading to 8" production facilities to meet the higher demand from the consumer sector. By 2011, at least 12 companies will operate at this larger wafer size.

"Some companies like Analog Devices are at the limit of their current capacity, due to its strong automotive sensor offering, and has recently decided to work with non-MEMS CMOS foundries like TSMC, a first in the industry. UMC will also join the MEMS community, partnering with Asian Pacific Microsystems," he says.

And, how would the new entrants be investing in R&D? Will they be doing enough?

The analyst says that R&D rates run high in automotive (12-15 percent of MEMS revenues) and even higher in consumer (can be 15-20 percent). The high R&D rate is needed to sustain leading edge products in fast moving markets. Deep R&D pockets are needed, a luxury that is not available to all.

Elaborating a bit more on the market consolidation, he says: " Today, the share of the MEM revenues in the hands of the top 30 MEMS companies grew at about the same rate as the market. The markets that drive growth in MEMS are consumer electronics and automotive sensors.

"The sensors will be increasingly commoditized due to extreme price pressure in both sectors, and iSuppli expects the production of MEMS devices for these two markets to be concentrated among fewer companies in the future. One facet is manufacturers attempting economies of scale by combining sales in automotive and consumer areas, e.g. at Bosch, and in future with Freescale and ST.

"Other companies are pioneers and hold a strong market position for a relatively long time. Examples are TI with DLP chips and Knowles with MEMS microphones. We also expect more M&As in the near future to exacerbate the consolidation."