Eroding ASP's, Growing Device Volumes and Complexity Challenge MEMS Development
MIKE ROSA, PhD
Are foundries the ultimate beneficiaries?
Today, MEMS is an almost $15B global industry growing at just over 13% per year in total. But these overall numbers don’t tell us who is prospering and who is not, nor do they indicate the rate and extent to which average selling prices (ASPs) of MEMS devices have fallen for certain products.
This price action, coming at a time of growing device complexity and volumes, poses significant development challenges for some suppliers of MEMS products. It also brings opportunities for foundries and fabless companies who participate in the MEMS space.
Over the past six to eight years, the single largest adopter of MEMS devices has been the consumer electronics market (Figure 1). In that time, we’ve heard reports of large IDMs such as STMicroelectronics, Texas Instruments and others breaking the $1B+ revenue mark in MEMS sales. However, like most things in the consumer electronics space, as volumes go up ASPs tend to go down, and in this case ASPs have declined about 3-5% per quarter for the most popular devices, and up to 7% annually in general.
|Figure 1. The number of MEMS devices has increased substantially as demands for increased functionality in consumer electronics, automotive and industrial applications continue to surge.|
As shown in Table 1, MEMS-based devices such as accelerometers and gyroscopes–the staple of now-ubiquitous smartphones and tablets–are seeing revenue declines coupled with an increase in wafer starts per year, and an even higher increase in unit volumes of devices sold into the market.
|Table 1. Top ten device applications forecast for calendar year 2014. Adoption of MEMS technology for consumer electronics and automotive applications has driven billion-dollar revenues for a few select companies, which have wafer and unit volumes many times that of suppliers of other types of MEMS devices (Yole Developpement, 2013).|
This observation can be explained by a couple of combined factors. First is simple economics: ASPs tend go down over time based on increased sales volumes and competitive pressures. But second, in the über-competitive world of consumer electronics there is constant pressure not only to reduce prices but to simultaneously improve device performance and overall device specifications.
Consequently, as MEMS devices continue to evolve, their level of integration with electronic circuitry increases, die footprints shrink (allowing more devices per wafer), package heights are reduced and all the while, functionality is on the rise.
In a climate of increased unit volume demand, we’re seeing device complexity increase together with an increase in wafer starts and manufacturing complexity, coupled with overall flat-to-declining device revenues due to eroding ASPs.
For IDMs that once solely dominated the MEMS space, this harsh reality is shown clearly in the revenue plots of Figure 2.
|Figure 2. IDMs in the consumer electronics segment that once dominated the revenue charts are now seeing year-over-year revenue declines driven primarily by reductions in MEMS ASPs. Source: Yole Developpement, 2014|
Large vertically-integrated IDMs have benefited the most from the demand for MEMS devices in recent years. However, companies such as HP that have only one product type in the MEMS segment (e.g. inkjet print heads) began to see their MEMS revenues decline at a much earlier stage as their products began to suffer the effects of commoditization.
In contrast, IDMs whose portfolios included multiple types of MEMS devices were better positioned to weather the storm of commoditization as declines in one application segment were offset by gains in another. That pushed out overall decline by several years.
Companies such as Bosch that have remained focused on MEMS for automotive markets have enjoyed continued and steady revenue growth. Only in the last 1-2 years have they begun to focus some of their development efforts toward the consumer space.
Of all the types of companies shown in Figure 2, it is fabless companies such as Knowles Acoustics and Invensense that may yet be the winners in all of this. The reason is that fabless MEMS device companies do not share the considerable expense that comes with owning fabs. As such, they have a greatly reduced cost burden attached to each and every device they sell, allowing them to provide lower ASPs and to roll with the proverbial punches, adopting new device-level technologies as required.
This is a switch from historical trends, in which the most successful MEMS manufacturers have been IDMs capable of developing key materials and process flows for specific devices.
For example, development of proprietary process flows (such as STMicroelectronics’s THELMA - Thick Epitaxial Layer for Micro-gyroscopes and Accelerometers) and associated process modules has meant that over the past 3-5 years IDMs have occupied the top five spots in rankings of MEMS device manufacturers.
However, as MEMS development technologies mature much of the once-proprietary process and materials know-how held by large IDMs has become widely available in the MEMS industry. Whether motivated by a desire to collectively advance the field, generate additional revenue streams through licensing or create additional sources of manufacture, the sharing of fabrication knowledge has now levelled the playing field in MEMS. And some may argue that this has tipped the economics of MEMS manufacturing in favor of the foundries playing in this space.
MEMS FOUNDRY MODEL
Could the combination of eroding ASPs, increased investment in manufacturing and new technologies, and the looming adoption of 300mm technologies for MEMS, along with the increasingly competitive MEMS device landscape, point to a foundry model for MEMS as the key to long-term success?
Key device foundries in the MEMS space – TSMC, Globalfoundries, SMIC, DALSA, Asia Pacific Microsystems (APM) and others – have been trailing IDMs and other foundries in MEMS revenue.
But for these companies, closer collaboration and/or partnerships with equipment vendors such as Applied Materials on the development of key processes and materials can afford them the opportunity for growth in key segments, as the number of fabless MEMS companies continues to grow.
For more information, contact Mike Rosa at firstname.lastname@example.org.