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July 16, 2004 – The first half of 2004 is looking a lot like the last half of 2003 for the MEMS industry, only better. If trends continue, 2004 will be a banner year, or in the very least, an interesting successor to 2003.
Although 2003 didn’t start off that great, it ended quite well. Year-to-year revenues were up 35.7 percent in 2003 from 2002, with much of that occurring in the last half of 2003. In fact, there was a discernable surge in customer activity in the fourth quarter, which has continued through the first half of 2004.
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Adding to that momentum is the fact that new startups outpaced shutdowns at a ratio of more than 12 to 1. It should be noted that while some of these “new” companies have been in stealth mode and only recently chose to make their debut (or publicly reveal their R&D efforts) over the past 12 months, nearly half were indeed newly established.
Add a dramatic increase in spending by venture capitalists and all signs point to a strong 2004. VC funding of MEMS companies in the first half of 2004 has already exceeded all of 2003 by 33 percent. In addition, murmurs of acquisitions have become louder among both large semiconductor companies and startups alike.
In this respect, the next 18 to 24 months could be very interesting.
But back to 2003: Aside from the boost in revenues and startup funding, there were plenty of other noteworthy developments last year.
Microfluidics dominated the device category, accounting for nearly 50 percent of total unit shipments and a third of total revenues in 2003. Inertial and pressure sensors each marked nearly 25 percent of unit shipments and more than 20 percent of revenues.
This isn’t surprising as most of the more novel MEMS devices have yet to be fully realized commercially. Some, such as optical MEMS, RF MEMS and microphones, are now starting to hit the market, but their overall impact on total unit shipments or revenues still won’t be felt for quite some time — though it will happen.
A number of segments saw strong increases in revenues. Inertial sensors and gyros in particular experienced dramatic revenue gains over the course of the year. Pressure sensors for tire-monitoring systems picked up momentum. RF MEMS continued their march into communications applications.
Microfluidics expanded into new lucrative areas, while optical MEMS established dominance over other technologies in strategic consumer segments — particularly home theater and digital TV — in addition to finally moving forward in optical networking.
Why such a boost in customer interest and demand? The introduction of next-generation devices across nearly all product categories has been key. The devices offered the performance parameters, size reductions, and price points required by customers, particularly those in the consumer electronics space.
Improved economic conditions overall were a significant factor as well.
Of the 230 companies In-Stat/MDR tracks, 106 generated at least several million dollars in revenue in 2003; the remaining 124 did not meet that threshold. But an increased number of those 124 companies did generate nominal revenues from product sampling.
That again points to the number and diversity of MEMS devices slowly working through the development pipeline, and the fact that they are, indeed, finally moving into the market.
The distinction between a good idea and market reality is a very important one for all involved. And the sooner it happens, the better.
For the first time, In-Stat/MDR has created a ranking of the Top 20 MEMS suppliers based on revenues. It may or may not come as a surprise that these 20 companies alone accounted for 86.7 percent of revenues in 2003, and 88.8 percent of all units shipped.
In terms of who they are, the mix is very, very interesting: Twelve are leading semiconductor companies or large multinationals, and the remaining eight are startups.
The top three MEMS suppliers, based on 2003 revenues are: Hewlett Packard, Texas Instruments, and GE Infrastructure Sensing. Also notable is the mix of products from which the top three generated their revenues: microfluidics, optical MEMS, and sensors, respectively.
Over the next five years, unit shipments are forecast to increase at a Compound Annual Growth Rate (CAGR) of 12.8 percent, from 1.1-billion units in 2003, to 2-billion units in 2008. Revenues are forecast to increase at a CAGR of 13.1 percent to $9.9 billion in 2008, up from $5.3 billion in 2003.
Although we can certainly expect a few troublesome spots to emerge along the way, overall, the next few years look good indeed.