MEMS doesn’t spell auto opportunity, despite market report

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March 31, 2004 — A recent report from a French market research firm says the market for MEMS gyros and accelerometers is growing, but industry experts say that does not necessarily mean more opportunity for independent MEMS makers.

The report, released earlier this year, said the market should be strong the next few years as growth in gyros outpaces that of more established accelerometers and gyro costs come down. Published by research firm Yole Developpement, the report forecasts the gyro market will grow from $314 million in 2002 to $649 million in 2005 and that accelerometers will grow from $420 million to $560 million.

Although the technologies have applications in defense, medical and other areas, the high volume opportunity is in automotive. But in automotive, according to Bruce Alton, vice president of Edmonton, Alberta-based MEMS maker Micralyne, “It’s just very difficult for a mid-level fab to carve out space.”

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Instead, he said, “It appears that most of the high volume automotive business is going in-house.” He said one reason it is difficult to break into the business is the fact that large sensor vendors have vertically integrated their operations in recent years.

The only alternative, he said, is to contract as an alternate supplier. “Once it’s stable in-house, then they might offer it to a supplier.”

But that’s a tough road, too. “It’s not a bad strategy,” said Joe Giachino, an automotive industry veteran and industrial liaison at the Center for Wireless Integrated MicroSystems in Ann Arbor, Mich. But the way it usually works out is that “they keep the higher margin business in-house and farm out the older technology.” And older technology, he said, usually equals commodity products with lower margins.

That explains why Micralyne is looking for opportunities outside automotive where it can carve out a niche for itself. The company announced a $2 million contract in February to supply MEMS-based components for chemical analysis to an unnamed instrumentation firm. It also recently struck R&D agreements with LioniX, a Netherlands-based microsystems product manufacturer, and MicroCHIPS, a maker of MEMS-based drug delivery and biosensing devices.

Others who have tried to make a sanctuary of niche applications haven’t been so lucky, as fabs went through a dramatic shakeout in recent years. Even those who have attempted to feed high volume markets like mobile phones have been forced to shut down, as Grenoble, France’s PHS MEMS, an RF MEMS developer, did in February.

As for when those niche applications will take off, it’s anybody’s guess. “I’m thinking that there’s still pressure on this industry,” said Marlene Bourne, senior MEMS analyst at In-Stat/MDR. “I’m figuring for at least four more quarters before a major pickup.”

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