Worldwide market for multimedia semiconductors
09/01/1997
Worldwide market for multimedia semiconductors
Mercedes Whitbread, Electronic Trend Publications, San Jose, California
Since the beginning of the era of personal computers, tremendous efforts have been expended to enhance delivery of multimedia. Only a few years ago, multimedia was not a particularly interesting experience. Today, quality multimedia has become a reality and is a key element in the computer and consumer electronics industries` current product thrust.
This study examines the key semiconductor devices underlying multimedia products. Included are audio, video, 3D graphics, and multifunction devices used in PC-based and consumer-based multimedia. The world market for multimedia semiconductors has been growing at an impressive rate. Applications requiring multimedia semiconductors of all types are increasing and are using current chips -while making room for the next generation of chips as well. Thus, the worldwide multimedia semiconductor market is expected to grow even more rapidly through the end of the decade, particularly as the world of consumer electronics and computers overlap, and as these two converge with communications.
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Worldwide market for multimedia semiconductors
In 1996, the worldwide market for the multimedia semiconductors (specialized audio/video processors) covered by this report reached 45 million units (Table 1) for revenue of $896 million (Table 2). (For this report, a "unit" may be either a single chip or a chipset sold as a unit. The number of chips used varies considerably by vendor and/or application. Digital video disk (DVD), for example, may require up to six chips for implementation, while a sound card may require only a single chip for compression/decompression.) By 2001, this market is expected to reach 229 million units shipped (Fig. 1) and $6.8 billion revenue (Fig. 2), for a compound annual revenue growth rate of 50%.
Personal computing has been the major driving force behind this market to date. And since there is no sign of a slowdown in the overall market for personal computers -growth is predicted at anywhere from 10 to 20% annually for the next several years -there will be high demand for semiconductor devices for many years as well. (In personal computing, the devices may be integrated onto the motherboard or may be implemented via add-in cards. The numbers counted attempt to distinguish between motherboard implementation versus add-in card implementation so that there is no double counting of semiconductor devices.)
The highest future growth will come from the consumer electronics market. Products like set-top boxes and DVD players are expected to provide a healthy chunk of the multimedia semiconductor revenue throughout the world. DVD players, in particular, are expected to replace current CD-ROM players and VCRs in home entertainment. Once they reach an acceptable consumer price point, DVDs should be shipping in the tens of millions/year.
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Figure 1. Expected growth by device class and by application for multimedia semiconductor units, 1996 and 2001.
Competitive environment
The multimedia semiconductor market is one of the current hot battlegrounds of the semiconductor industry. A variety of companies are involved in this market -ranging from start-ups to industry giants. Some of these companies complement one another, while others compete. And some companies compete head-to-head, while others offer products that only overlap in functionality. Many companies are jointly developing products. Some of the large companies are partnering with start-ups to co-develop products using the financial resources and fabs of the large company and the technological innovation of the start-up.
While partnerships with other developers are often a way of competing in the semiconductor industry, successful IC manufacturers also work closely with their customers to make inroads into the market. Chip vendors who can provide customers with early access to their technologies fare well in this market. Many companies work closely in the product development process with leading manufacturers of products that incorporate their ICs. Some companies offer OEMs system engineering and integration services to help them implement the ICs into their products. This way, potential products can be designed with jointly developed, customer-driven requirements.
Being early to market is critical to a company`s ability to capture market share. Chip vendors can also focus on providing solutions for manufacturers in high volume consumer applications. Thus, companies should identify market segments that have the potential for substantial growth. The ability to get to market quickly with an affordable, nonproprietary, high-quality solution will dictate the market winners in most application segments. To accomplish this task, a company must focus on the evolution of standards and actively participate in standards development.
Each market for multimedia semiconductors has its own keys to profitability and its own stresses. The DVD would appear to be the most potentially lucrative area. Growth should be excellent, and there will be no host CPU for competition over the processing tasks -at least for stand-alone DVD players. However, the DVD market will probably be dominated by a small group of consumer electronics companies who will wring every last cent from their vendors.
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Figure 2. Expected growth by device class and by application for multimedia semiconductor revenue, 1996 and 2001.
In the PC market, the competition from ever more powerful host CPUs could be painful. Already, the emergence of software-based video playback capabilities (from vendors like Horizons Technology, Intel Corp., Motion Pixels Inc., Rad Software Inc., and Radius Corp.) has been a drag on video board vendors. To combat this problem, some vendors are shifting their focus to devices that provide integrated graphics and video acceleration. Video chip supplier S3 Inc., for example, is adding more features to lure OEMs, board makers, and end users alike. Other companies are focusing on high-end features such as video authoring.
Some companies believe that individual chips tuned to each multimedia data stream remain a viable strategy. Cirrus Logic is developing modem chips, MPEG decoders, video encoders, audio processors, and 2D and 3D graphics chips. The company integrates features for specific applications. Using a dedicated processor for each data flow in a multimedia system ensures that all processing needs will be met, regardless of the combination of data flows moving through the system.
For the most part, each vendor offering a multimedia solution approaches multimedia in a fashion somewhat determined by its own history. This is both an advantage and disadvantage. Using existing design and manufacturing techniques, for example, lowers costs but may result in a product family ill-suited to the task. Many companies today are weighing the pros and cons of retooling existing devices. Some large companies are setting up separate "start-up" companies to attract the talent needed to design the best products. This enables them to leverage their financial and manufacturing resources.
As with most new markets, sometime in the future there will be a shakeout of second-tier players, who will not be able to generate enough revenue to maintain R&D efforts at the level necessary to continue to deliver competitive products. Additionally, as multimedia evolves, niche markets that could each sustain a few players will be absorbed by the offerings of the top-tier players. The multimedia market will provide much excitement for semiconductor vendors over the coming years. Only time will tell the ultimate winners.
Acknowledgment
This article was reprinted from the Electronic Trend Publications report The Worldwide Market for Multimedia Semiconductors.
Mercedes Whitbread is an analyst at Electronic Trend Publications. She has been a technical writer and research analyst in the data communications and telecommunications industries for more than 10 years. She has worked directly with research consultancies as well as Fortune 500 companies on a wide range of syndicated and custom market research projects. Electronic Trend Publications, 1975 Hamilton Ave. Suite 6, San Jose, CA 95125; ph 408/369-7000, fax 408/369-8021.