iSuppli: 2009—The Hockey-Stick Year for MEMS

Contributed by Jérémie Bouchaud, Director & Principal Analyst, MEMS, iSuppli

The year 2009 started badly for MEMS, just like for the rest of the economy. Unlike other MEMS analysts who seem to believe that MEMS is immune to the economic crisis and that revenue stayed exactly flat in 2008 and 2009, the latest revenue reported to iSuppli from MEMS manufacturers show that shipments were still up 10% from 2008 even though revenue was down 8.6%. This followed a similar revenue drop of 4.8% in 2008.

The economic crisis resulted in the closing of a number of fabs, including Colibrys, which closed its Texas-based 6-inch fab, leaving the company with its original 4-inch fab in Switzerland. Other foundries suffered, too, and most saw revenues declining by 20%-30% compared to 2008, with staff cuts following in proportion. iSuppli also noticed that a number of companies have extensively made use of unpaid leaves, especially in the first half of the year.

Have we hit bottom?

iSuppli tracks semiconductor revenues of close to 300 companies in its Competitive Landscaping Tool (CLT, non-captive revenues only). The major MEMS suppliers, such as TI, STMicroelectronics, Freescale, and Bosch, report MEMS revenues directly to iSuppli on a quarterly basis, enabling iSuppli to track the evolution of MEMS revenue during the year. Figure 1 clearly shows that the MEMS market hit bottom at the end of Q1 2009/early into Q2 2009, and then rebounded later in Q2 and Q3, resulting in a revenue growth pattern resembling a hockey stick. Quarterly MEMS revenues of these representative companies started to drop in Q3 2009, ending at -25% down from Q1 2009, although revenues bounced back in Q2 (+17%) and Q3 (+13%), with iSuppli expecting another Q/Q growth for the last quarter of 2009.

Q/Q MEMS and Sensor revenue growth of representative companies

It is too soon, however, to be euphoric. Because the reported MEMS revenues follow three consecutive quarters of negative growth, revenue in the third quarter this year was still 18% lower than in Q3 2008. In addition, overall MEMS revenue—including in the captive inkjet market—is down -8.6% in 2009 with an estimated $5.6 billion, compared to the historical peak of $6.4 billion in 2007.

Nonetheless, the outlook for 2010 and beyond is good. iSuppli expects MEMS to return to double-digit growth in 2010 with an overall $12.2% CAGR for the 2009-2013 period.

2009 review by application field

As shown in table 1, revenues were down in the MEMs applications for data processing, automotive, industry and process control, and wired communications. Growth in three areas, however, managed to remain flat or even post an increase in spite of the crisis:

1. Consumer electronics and mobile phones grew 6.8%. Wireless confirms its status as the locomotive of the industry, with mobile phones the true growth driver here. In comparison, MEMS revenues for gaming, laptops, DSCs, and MP3 players were flat in 2009, and DLP sales for rear-projection TVs and consumer projectors were down (source H2 2009 Consumer and Mobile MEMS tracker, December 2009).
2. Aerospace and defense was flat. The military business grew slightly, thanks to MEMS gyroscopes from Silicon Sensing Systems that increasingly replaced Fiber Optical Gyroscopes on the one hand, and to micro-bolometers on the other in light of major defense procurement contracts awarded to BAE Systems and DRS. The market for sensors in civilian aerospace suffered as system companies tried to dramatically reduce their inventory, reflected in the experience of MEMSCAP with their aerospace pressure sensor business.
3. The medical market for MEMS was affected more by the crisis than iSuppli had anticipated, growing only 2%. In fact, medical system companies have followed other sectors in running their inventory down, resulting in an artificial reduction in demand for MEMS devices.

Caption: MEMS pressure sensor module for aircrafts (MEMSCAP)

MEMS revenue yearly growth by application field

	2007	2008	2009	2010	Applications of MEMS
Data processing	-0.2%	-5.7%	-9.5%	-6.1%	Printers, business projectors
Automotive	9.6%	-6.9%	-19.7%	11.8%	Safety, powertrain, infotainment, body electronics
CE and mobile phones	4.8%	14.3%	6.8%	25.6%	Phones, gaming, DSCs
Industry & process control	22.3%	-30.2%	-11.4%	34.8%	Instrumentation, automation, oil & gas exploration, health & usage monitoring
Aerospace, defense, security	4.6%	6.4%	0.1%	4.5%	Missiles and rockets, civilian and defense aerospace, surveillance, firefighters
Wired communications	4.9%	-0.6%	-12.9%	4.8%	Optical telecom networks, base stations, Automated Distribution Frameworks
Medical electronics	9.0%	7.6%	2.0%	14.6%	Blood pressure sensors, microfluidics for drug discovery and diagnostics, drug delivery, pacemakers, respiratory equipment
Total	6.1%	-4.9%	-8.6%	10.5%

How robust really is the recovery?

Sales are up again since the second quarter, sometimes at an incredible pace. Bosch reported that MEMS sales were up 56% in Q2, and Denso in September broke the historic monthly MEMS production the company had set in 2007, with 14 million MEMS shipped in a month! While those were good signs, the market—especially the automotive sector—is not completely out of the woods yet. For instance, Bosch’s second quarter, although much better than in Q1, was still 40% lower than the same period in 2008. In addition, the fast pace of growth at Denso does not so much reflect end-market demand as it is a result of supply issues following the production standstill in Q4 2008 and Q1 2009. In the meantime, OEMs burned off inventory, and as demand began to pick up in Q2 2009, some sensor suppliers were not able to produce fast enough. iSuppli expects that the supply chain will return to normal levels in 2010.

Highlights in consumer and cell phones

This year, cell-phone accelerometers are, once again, the big winner. iSuppli’s recently updated analysis, based on the features of 1,000 phones introduced in 2009 and shipments reported by sensor makers, shows that 27% of the phones produced in 2009 contain a MEMS accelerometer— up from 11% in 2008! Associated revenue increased by 59%.

MEMS gyroscopes used in gaming almost tripled to top $94 million in 2009, mainly driven by the introduction of the Wii Motion Plus by Nintendo.

Wii Motion + accessory (Nintendo)

Not everything is in the red in consumer electronics, however. Shipment of accelerometers in gaming dropped significantly as the Nintendo controllers achieved saturation, and resulting revenues were down 43% at the sensor level. In addition, as reported in the September issue of the MEMS market brief, the freefall of Motorola in mobile handsets is causing a drop of MEMS microphone revenues in cell phones. Saving The overall MEMS microphone market is Apple, which for the first time introduced a MEMS microphone in its new iPod Nano 5th generation.

MEMS pico-projectors using Microvision’s MEMS scanner and TI’s DLP are coming to the market this month, just in time for Christmas (see news section). Other non-MEMS based pico-projectors were introduced in the fall 2009, such as Nikon’s recent Coolpix digital camera using an LCOS display. This not only raises the profile of pico-projectors, it also benefits MEMS DLP or scanner-based pico-projectors.

What’s going on in the world of RF MEMS switches and varactors? Until mid-2009, WiSpry was still on track to start shipping RF MEMS varicaps for cell phones. Shipments will come a bit later than initially announced. The new plan is to start serial production in the first half of 2010 (at last), with tunable antennas as the first targeted application. In 2009 iSuppli noticed that cell phone makers were looking more eagerly for a solution for the tuning of the front end, either tuning/matching of the antenna or an impedance matching network for a reconfigurable Power Amplifier. Cell-phone OEMs expect 50%-80% of their 3G and 4G phones to have some kind of matching by 2013. MEMS, though being one possible solution, is not the only one.

BST varactors from Paratek made great inroads as well in 2009 and appear today to be the best challenger to MEMS, next to SoS semiconductor switches. Next to WiSpry, EPCOS is the next major player, followed by European start-ups DelfMEMS and Baolab. At the end of 2008, RFMD dramatically reduced its RF MEMS effort.

Fab closures, spin-outs, M&As, cooperation efforts, refocusing, outsourcing, and newcomers: The waltz of MEMS companies in 2009

The year started with dramatic changes in the automotive MEMS world. iSuppli found out at the beginning of the year that Schneider Electric was to shut down Systron Donner Automotive and its gyroscope production (an iSuppli scoop). Shortly after, iSuppli also found out that Infineon was shoving Sensonor out in an effort to cut costs (another scoop; see March market brief). Also affected were the U.S. MEMS fab from Continental (formerly Motorola Automotive) and the Delphi MEMS fab in Kokomo. As explained in the November Brief, while GM has now acquired assets in the semiconductor and MEMS fab of Delphi as well as taken over part of the team, it’s the overall future of the MEMS fab that is uncertain.

Some M&As and cooperation initiatives shook the MEMS microphone market, too. Bosch acquired Akustica and its emerging MEMS microphone business in August. As explained in the September newsletter, and contrary to what we keep hearing in the press and from other analysts, iSuppli does not believe that Bosch has acquired Akustica for its monolithic CMOS-MEMS process. Bosch already has the world’s largest team of MEMS R&D engineers (300) in addition to its MEMS team in its corporate R&D. Also, Bosch has in place a monolithic CMOS-MEMS process for all its silicon pressure sensors (No. 1 worldwide in automotive pressure sensors; source H2 2009 Automotive MEMS tracker).

Bosch had experimented with MEMS microphones in its labs for a while but did not have the right product at the right time, and as Akustica was looking to be acquired, iSuppli believes the M&A was an opportunistic move and a cheap ticket into the MEMS microphone market.

STMicroelectronics had also been playing with MEMS microphones in 2006 but concentrated its effort on inertial sensors in the interim. But at the end of November, ST announced its cooperation efforts with Omron to bring a digital MEMS microphone to the market early in 2010. The next three years will show if the two market leaders for consumer accelerometers—ST and Bosch—will be able to repeat their success story in microphones.

Another clever move was made by Kionix, which became part of the $4 billion semiconductor company Rohm in November (see analysis in November market brief). While Kionix has done incredibly well as an independent entity until now, being part of a larger group was needed for the company to survive as accelerometers become commoditized and economies of scale acquire paramount importance.

Noteworthy, the two MEMS giants TI and HP have started diversifying their approach to MEMS, next to core competence, in the DLP micro mirror array and the inkjet head sectors, respectively. TI created a “MEMS solution” group earlier this year to leverage MEMS DLP knowledge and other competencies such as wireless or ultra-low-power MCUs. Also in November, HP revealed a high-performance MEMS acceleration and vibration sensor. Like TI, HP is leveraging its MEMS know-how from the print head business as well as from other parts of the group, such as the networking business and the mobile data center for the expertise in application software.

What about TSMC, UMC, SMIC, etc? These companies announced aggressive plans for MEMS early in 2008, but little has happened up to now, except for the production of ADI’s consumer accelerometer at TSMC (small, though) and the ramp-up of InvenSense’s new-generation gyroscopes (which iSuppli believes is also occurring at TSMC). SMIC has some programs running for microvalves (small to medium volumes) and microphones, but nothing yet is in production. Overall, iSuppli doubts the sustainability of the MEMS effort and commitment of these CMOS foundries. More important is the recent move of Bosch, which announced big plans for MEMS foundry services at the MEMS executive congress in November. Noteworthy, other large semiconductor and MEMS IDMs also explore the possibility of offering MEMS foundry services.

Last but not least, 2009 saw a new audience attending MEMS conferences. Analog and mixed signal companies as well as microcontroller firms are looking to expand business in new areas, and MEMS appears to be an attractive opportunity from a technology and market perspective. An example is Atmel, which took over the team of LV-Sensors in the summer, or Maxim, which does not hide its plans as it sponsors MEMS events (e.g. from the MEMS Industry Group) and takes part in MEMS panel discussions. Some companies, which have started their own MEMS R&D effort, will also introduce MEMS products in 2010. Yet others run around the world, exploring the best bargains to be obtained as a number of companies still look to be acquired at the end of 2009.

And the winner is…

No. 1: InvenSense. This Californian start-up, No. 2 in our winner’s ranking for 2008, deserves first place this year. The breakthrough really came this year with the Wii Motion Plus, and InvenSense emerged as the No.1 supplier of gyroscopes in revenue in 2009 with an estimated $57 million (source: H2 2009 Mobile and Consumer MEMS tracker, December 2009), just ahead of Epson Toyocom. InvenSense also deserves its first-place finish in having won the final sprint against ST for the world’s first 3-axis gyroscope, just 16 days before ST’s announcement.

No. 2: Bosch Sensortec. 2008 was already a great year for Bosch as it specialized in the consumer and mobile markets. As it turns out, 2009 was even more fantastic for the company, with revenues growing more than threefold to reach an estimated $80 million. Bosch has rapidly become the No. 1 supplier of accelerometers to Samsung and LG. In addition, it has become the second source for Sony Ericsson in 2009, next to ST, and has become the top supplier for Japanese cell-phone makers. Bosch Sensortec is now ST’s biggest challenger.

No. 3: STMicroelectronics became the leading manufacturer of MEMS for consumer electronics in 2008. STMicroelectronics’s MEMS revenue in consumer electronics was flat in 2009, but the company has managed to maintain overall pole position. The vast majority of its MEMS revenue comes from accelerometers—ST dominated 56% of this market in 2008. ST’s VP and General Manager of MEMS, Benedetto Vigna, warned in an interview on Bloomberg TV in the summer of 2009 that its group would do everything to keep its market share. Impressively, ST largely succeeded in defending its market share as it still holds 50% of the mobile and consumer accelerometer market in terms of revenue (source: H2 2009 Consumer and Mobile MEMS tracker) in spite of the fierce competition. While the collapse of the accelerometer market for gaming badly hurt ST, the company compensated for the decline through a surge in the shipment of accelerometers for cell phones; ST still holds 46% of the accelerometer market for cell phones. Noteworthy also, ST increased its efforts on the 2-axis and 3-axis gyroscope in 2009, stepping into the MEMS microphone market in November 2009 in cooperation with Omron.

ST accelerometer in Apple iPhone 3Gs (iSuppli teardown)

What follows? Are MEMS speakers the next holy grail?

The beauty of the MEMS sector is that every two or three years, another completely new device emerges with the promise to be the next multi-million killer application. MEMS speakers were mentioned five years ago as a natural extension of MEMS microphones. Akustica (now part of Bosch since August 2009) had MEMS speaker on its roadmap at the company’s start; Carnegie Mellon had some interesting developments on MEMS speakers as well. Until recently, no company had yet emerged with a convincing proof of concept. That changes, however, with Audiopixel, which plans to display a prototype at CES in January 2010 and is initially targeting high-definition flat TVs.

MEMS-based speakers (Audiopixels)