Modest Growth in the Communications Silicon Market Despite U.S. Economic Worries

The Linley Group has published a report which is predicting a steady growth rate of 5 percent per year in the wired communications semiconductor market segment up to 2012. The firm says that despite recent economic turbulence in the United States, 2008 year-to-date sales of wired communications ASSPs have been relatively strong, and the revenue outlook for a number of product segments, including network processors and Ethernet devices, remains positive.

"Despite ongoing reports of doom and gloom in the U.S. economy, we believe a number of growth opportunities still exist, and the impact of the recent downturn will not be universal," said Joseph Byrne, senior analyst, for The Linley Group. "This report identifies the key products and technologies that will shape the communications silicon market over the next five years, enabling decision makers to make informed choices and better understand strategic directions in this dynamic market."

Network processors are among the fastest growing areas, having penetrated only one-third of their total addressable market to date, according to the firm. The Linley Group forecasts a compound annual growth rate (CAGR) of nearly 13 percent for this segment from 2007 to 2012. The firm also predicts a CAGR of 10 percent over the same five-year period for Ethernet semiconductors. In dollar terms, most of the growth is expected to come from Gigabit Ethernet (GbE), accounting for more than half of all clients shipped in 2007. The fastest growing Ethernet sector is 10G Ethernet (10GbE), with upside in both client and switching applications. Demand will be driven by both a natural migration to faster speeds, as well as the rising popularity of Fibre-Channel-over-Ethernet.

Other report highlights include (all growth rates CAGR 2007 to 2012):

• Wireless handset shipments are expected to grow at about 8 percent, and the integration of additional functions in the baseband processor will minimize price declines.
• The security accelerator market will rapidly decline, as accelerator functions become increasingly integrated into the embedded CPU.
• The broadband market will begin to decline, with broadband subscriber numbers having peaked in 2008. Industry revenue from broadband components in 2012 is anticipated to be less than revenue in 2007. PON deployments will continue to rise, with strong growth coming from China.
• PCI Express (PCIe) switches are the bright spot in the interconnect market, as PCIe becomes the standard chip-to-chip interconnect.
• FPGAs are growing slightly faster than ASSPs/ASICs, becoming more capable and providing a less expensive alternative to these hardwired options.
• Cellular chip shipments are on the rise, but price declines will limit sales growth. Meanwhile, non-handset devices (cellular modems, machine-to- machine applications, and new consumer products, such as the Amazon Kindle wireless reader, are expected to provide upside.
• Connectivity chips (Bluetooth, Wi-Fi, GPS) for handhelds continue to experience strong growth.

Posted to the site on 9th October 2008