CES 2015: wearables and smart home

2015 International CES was held last week in Las Vegas. The Consumer Electronics Association (CEA) which puts on the show said over 170,000 people attended. The show featured more than 3,600 exhibitors covering over 2.2 million square feet of exhibit space.

In advance of the show, CEA released highlights of its forecast for the 2015 U.S. consumer electronics market, measured as shipments to U.S. dealers. The overall market is expected to grow 3% from 2014. One of the fastest growing markets is wearables at 133%. Wearables includes smartwatches and health & fitness trackers. Smartphones are expected to grow 5% and account for 23% of the overall consumer electronics market. Tablets, which have been a hot growth item since Apple reinvigorated the market with the iPad in 2010, are projected to decline 1%. Overall televisions and displays are forecast to decline 2%, but 4K or Ultra High Definition (UHD) TV revenues should double from 2014.

U.S. Consumer Electronics Market Forecast, $ Billion

Source: Consumer Electronics Association (CEA)

2014

2015

Change

Total

217

223

3%

Wearables

2.2

5.1

133%

Smartphones

48.9

51.3

5%

Tablets

25.2

24.9

-1%

TVs & Displays

18.7

18.3

-2%

    4K UHDTV

2.4

5.0

106%

 

UHDTVs have become a mainstream product fairly quickly. In our 2013 International CES report, Semiconductor Intelligence stated: “The biggest visual impact was from 4K (or Ultra HD) TVs. With price tags of $20,000 and up and little content in 4K, 4K TVs will not have measurable impact on consumer electronics for a few years.” Now Bestbuy.com has major brand 55 inch UHDTVs for as low as $1000. CEA’s forecast of a $5 billion UHDTV market consists of 4 million units at an average dealer price of $1250.

The hot product categories at 2015 International CES were digital health & fitness and connected home. The 2014 CES featured 366 exhibitors under the category of digital health and fitness. For 2015 the category was split into three (fitness & sports, health & biotech and wearables) and featured a total of 1,781 exhibitors, almost five times the number in 2014. The 2014 connected home category featured 982 exhibitors. In 2015 the number more than doubled to a total of 2,066 exhibitors in three new categories (smart home/appliances, safety & security, and energy management). The total of 3,847 exhibitors in these two categories is about equal to the total number of exhibitors at 2015 CES. Obviously many companies are classifying products in these categories as well as in the traditional CES categories. There is also likely overlap in the subcategories.

Digital health & fitness and connected home are each part of the “internet of things” or IoT. IoT has been much hyped in the last few years as a major growth area for electronics and semiconductors. Many definitions exist, but the internet of things can be simply defined as any device which communicates over the internet and is not a computer, tablet or smartphone. These devices often communicate with the internet automatically without the need for human intervention.

At 2015 CES, A&D Medical released the results of a survey of 2,024 U.S. adults conducted by Harris Poll. The survey showed 56% want to monitor their health with connected devices. The most desired vital signs the participants wanted monitored were blood pressure, weight, chronic conditions such as diabetes and hypertension, sleep, physical activity and diet. Only 5% wanted to monitor their sexual activity. However that low number did not stop OhMiBod from introducing a product in the category of wearable sex technology. We won’t go into detail here, but the specifics are in OhMiBod’s press release.

The 2015 CES Innovation Awards featured several products under the categories of wearables; fitness, sports & biotech; and smart home.

The Polar V800 (below) is a multisport GPS watch for activity tracking and fitness training with a list price of $520. It not only looks complex, the manual is 102 pages.

V800_Black_Front_Pace_Dist_Exe-time_imperial_JPG-(1)_1

The Withings Activité in contrast is a simple and elegant looking analog watch which doubles as an activity tracker and retails for $450.

1-Withings_Activit-eacute

 

The InBody Band measures body fat percentage, muscle mass and fitness as well as tracking daily activities. All in a smart looking smart band.

inbodyband_CES

The Cloud Based Advanced Smart Robo VacMop from Moneual learns from prior cleaning history data saved on the Cloud. This device could be also be classified under “things we didn’t know anyone needed” and “fun things to scare your cat.”

Cloud-based-Advanced-Smart-Robo-VacMop-Pspt_1

Also from Moneual is the Smart Beauty Mirror, an integrated grooming gadget with a mirror that “provides personalized fashion and beauty care information through face analysis, skin monitoring, trending fashions, web contents and more.” Now every woman can have the magic mirror the evil queen had in Sleeping Beauty.

Smart-Beauty-Mirror-Pspt_1

Netatmo’s WELCOME is a smart home camera with facial recognition. “It learns to recognize your household members and updates you on who is home when you are not, with concise notifications on your smartphone or your smartwatch.” Good way to keep your home safe and spy on who is with your kids when you are not home.

Press Kit Web_2

Another product for the paranoid home owner is Giroptic’s 360cam, a true 360 degree HD video camera.

360cam_1

Kodak has a baby monitor which allows a parent to have video and audio from the parent unit and on mobile devices. This device will familiarize your baby with a world in the near future where he or she will always be under surveillance.

baby

It is difficult to predict which of these products will be successful. However the “internet of things” is more than just hype – it is a fast growing area of consumer electronics.

Capacity utilization rising

Semiconductor capacity utilization (the ratio of production to capacity) appears to be on the rise, based on available data. Reliable global industry capacity data has not been available since Semiconductor Industry Capacity Statistics (SICAS) disbanded in 2011.

TSMC and UMC (the two largest pure-play foundries according to IC Insights) provide wafer shipments and wafer capacity data each quarter. Utilization is calculated by dividing the total wafer shipments by the total capacity of the two companies. This may not correspond exactly to capacity utilization due to definition and timing differences. Utilization calculated using this data exceeds 100% in some quarters. However it provides a reasonable indication of foundry utilization trends.

The U.S. Federal Reserve publishes data on capacity utilization for factories located in the U.S., regardless of the country of ownership. The names and number of companies participating in the Federal Reserve data for “Semiconductors and Related Equipment” is not available. We can assume the Federal Reserve data is a reasonable representation of U.S. semiconductor utilization.

Util 3Q14

TSMC + UMC utilization hit a low of 35% in 1Q 2009 during the economic downturn but quickly rebounded to over 100% in 2Q 2010. Utilization slipped below 80% in 4Q 2011, but has recovered to over 100% for 2Q and 3Q 2014. U.S. utilization (based on the Federal Reserve data) hit a low of 64% in 1Q 2009 and recovered to 84% in 1Q 2011. Utilization dropped below 70% in 1Q 2012 and has been close to 70% since. So what is the overall industry trend? It is a reasonable assumption the answer lies between the TSMC + UMC and Federal Reserve data. Thus global semiconductor capacity utilization peaked at over 90% in 1Q 2011 (the last complete SICAS data), slid to 70% to 80% in 2012, and recovered to over 80% in 2014. This level of utilization implies sufficient capacity to meet near term increases in demand but high enough utilization to ensure profitable operations for semiconductor manufacturers.

The capacity utilization trend is reflected in bookings (orders) and billings (shipments) of semiconductor manufacturing equipment. SEMI and SEAJ data shows a downtrend from early 2011 to late 2012. Bookings and billings began to increase in 2013 as capacity utilization improved. Bookings and billings in 3Q 2014 are down slightly from their peaks in 4Q 2013 and 1Q 2014 respectively, but the book-to-bill ratio has been above 1.0 for the last two quarters, indicating near term growth in semiconductor equipment.

SEMI 3Q14

 

Semiconductor Market Forecast Update

Our September forecast at Semiconductor Intelligence was for 10% growth in the global semiconductor market in 2014 and 11% in 2015. Based on WSTS data through October, 2014 growth will certainly be somewhere between 9% and 11%. We are maintaining our September numbers in our December update. Our preliminary projection for 2016 is 7% growth. The table below shows the Semiconductor Intelligence (SC IQ) numbers compared to other recent forecasts.

fcst Dec 14

 

In October, Gartner projected 7.2% semiconductor market growth in 2014, slowing to 5.8% in 2015 and 1.0% in 2016. The December WSTS forecast shows a similar pattern: 9.0% in 2014, 3.4% in 2015 and 3.1% in 2016. Mike Cowan’s December update of his forecast model has 9.7% growth in 2014 and 4.2% in 2015. We at Semiconductor Intelligence have a different scenario. We expect 2015 to be slightly stronger than 2014 based on improving global economic conditions. We see a moderation of growth in 2016, but still project a healthy 7% rate.

Where have all the drivers gone?

Tablets and smartphones have been key drivers of electronics and semiconductor growth for the last few years. However the growth rates for these devices are slowing as they have become more prevalent. Tablet shipments are expected to reach 229 million units in 2014, according to Gartner, equal to 73% of PC units. IDC projects smartphones will exceed 1.2 billion units in 2014, accounting for about two-thirds of total mobile phones. As show in the chart below, shipments of tablets versus a year ago have slowed to about 11% for the last two quarters from growth in the 90% to 160% range in 2012 and early 2013. Smartphone growth has decelerated from the 40% to 50% range through 2012 and most of 2013 to the 20% to 30% range for the last four quarters.

 

Units 3Q14

 

Despite the slowing growth of tablets and smartphones, new categories of devices are emerging to drive growth. Gartner has identified a segment which it calls ultramobile premium PCs – devices which have the functionality of PCs in lightweight and smaller packages similar to tablets. With 71% growth in 2015, Gartner expects these devices to drive 3.6% growth in total PCs in 2015 despite a 5.6% decline in traditional PCs. Gartner projects the tablet market will grow 19% in 2015. Combining tablets and ultraportable premium PCs results in 32% growth in 2015.

 

Annual change in units

2013-14

2014-15

CAGR 2014-18

Source
Traditional PC

-6.6%

-5.6%

  Gartner, Oct. 2014
Ultramobile Premium PC

75%

71%

   
    Total PC

-1.1%

3.6%

   
         

Tablet

10.6%

19.1%

   
Tablet + Ultramobile Premium PC

23%

32%

   
         
Regular smartphone

12.8%

 

3.7%

IDC, Sep. 2014
Phablet

210%

 

36%

 
Total Smartphone

23.8%

 

10.1%

 
         
Tablet

13%

 

6.80%

 
Tablet + Phablet

55%

 

22%

 

IDC has segmented out a high growth product area in smartphones which it calls phablets (combining phone with tablet, although I doubt any self-respecting supplier will use the term for its products). Phablets are smartphones with screens from 5.5 inches to 7.0 inches, thus displacing many of the smaller tablets. IDC forecasts the compound annual growth rate (CAGR) for phablets from 2014 to 2018 will be 36%, driving the total smartphone CAGR to 10.1% despite only a 3.7% CAGR for regular smartphones. IDC projects the CAGR for tablets from 2014 to 2018 will be 6.8%. Combining tablets with phablets drives a CAGR of 22%.

The ultimate winner in the merging of PCs, tablets and smartphones remains to be determined. It is likely that several categories of devices will continue to claim various segments of the market. Most business users will continue to need the full functionality of a PC, but may compromise with an ultramobile to get the portability and flexibility of a tablet. Many young consumers use their smartphones as their primary communication and computing device, but may like the tablet-like functions of a phablet. In many emerging markets, consumers can not afford multiple devices and will chose the one device which best fits their needs.

Electronics production

Production of electronic equipment is on an upward trend in many key countries. Three-month-average change versus a year ago for electronics in China reached 12.4% in September, the highest rate since March 2013. U.S. electronics production grew 6.9% in August and 6.5% in September. U.S. growth has not exceeded 6% since 2006, eight years ago. Taiwan’s electronics production has been seesawing from positive to negative in the last few years, but has been positive for the last two months. Japan remains the weakest country of the major electronics producers, with September declining 14%.

 

EE Sep14

 

Electronics production statistics are not available for the European Union or South Korea. Overall industrial production data shows improvement. European Union industrial production has shown positive three-month-average change versus a year ago for the last twelve months after being negative for most of 2012 and 2013. South Korea’s industrial production has seen positive growth for the last eight months after declines in most of the months of 2013.

IBM leaves semiconductors – end of an era

IBM 2IBM last week agreed to transfer its semiconductor business to GlobalFoundries. GlobalFoundries will acquire wafer fabs in East Fishkill, New York and Essex Junction, Vermont; IBM’s commercial microelectronics business, which includes ASIC and foundry; over 10,000 IBM patents related to semiconductor manufacturing; and over 5000 fab and ASIC employees. GlobalFoundries will supply all IBM’s 22nm, 14nm and 10nm ICs for the next 10 years. IBM will take a $4.7 billion pre-tax charge to write down the assets of the semiconductor business and to cover paying GlobalFoundries $1.5 billion over the next three years.

IBM began semiconductor manufacturing for internal demand, which was huge when IBM was the world’s dominant computer company. Although exact numbers are not available, IBM was almost certainly the world’s largest semiconductor manufacturer for many years. As IBM became less dominant in computers, its semiconductor division had extra capacity. In 1993 IBM entered the merchant semiconductor market as a top 10 company with $2.5 billion in sales. IBM sold DRAMs (which were invented at IBM), ASICs and microprocessors. IBM withdrew from the DRAM business in 1999 but continued to sell ASICs and foundry services.

IBM leaving the semiconductor business is the end of an era. IBM was one of 34 original licensees of AT&T’s transistor patent in 1952, according to Bo Jojek in History of Semiconductor Engineering. We at Semiconductor Intelligence examined the original 34 licensees to see what became of them. The original 34 companies were from the U.S., U.K., West Germany and the Netherlands. Sony was the first Japanese company to license the AT&T patent, but was not one of the original 34.

It appears only 22 of the 34 companies developed and marketed transistor products. Of the 22 companies, most of them either went out of business or were absorbed by other companies in the 1950s and 1960s. 12 companies became meaningful suppliers in the semiconductor business. What happened to those 12 companies and to transistor inventor AT&T?

  • AT&T – semiconductor business was part of Lucent Technologies spinoff in 1996. Lucent spun off semiconductor business as Agere Systems in 2002. Agere merged with LSI Corp. in 2007. LSI was bought by Avago Technologies in 2014.
  • General Electric – sold its semiconductor business to Harris in 1988. Harris Semiconductor was spun off as Intersil in 1999.
  • IBM – divesting its semiconductor business to GlobalFoundries.
  • IT&T Corp. – divested semiconductor business over the years. Most of the remains of IT&T Semiconductor are now part of Vishay and Micronas.
  • L.M. Ericsson – sold most of its semiconductor business to Infineon in 2002. Ericsson exited the modem IC business in September 2014 (previously part of joint venture with STMicroelectronics).
  • Microwaves Associates – now M/A-Com, still makes microwave semiconductor devices.
  • Minneapolis Honeywell – now Honeywell, still makes semiconductor sensors.
  • N.V. Philips – spun off semiconductor business as NXP Semiconductors in 2006. NXP is still a top 20 semiconductor company.
  • National Cash Register Company – now NCR. Remains of semiconductor business now part of NetApp.
  • Raytheon Manufacturing – sold semiconductor business to Fairchild Semiconductor in 1997.
  • Siemens and Halske – now Siemens. Spun off its semiconductor business as Infineon Technologies in 1999. Infineon spun off its memory business in 2006 as Qimonda (now out of business). Infineon remains a top 20 semiconductor company.
  • Sprague Electric Company – sold semiconductor business to Sanken Electric in 1990.
  • Texas Instruments – divested most non-semiconductor businesses in the 1990s. Remains a top 10 semiconductor company.

Of AT&T and the original 34 patent licensees, only Texas Instruments remains as the same company and a significant player. If Siemens’s Infineon spinoff and Philips’ NXP spinoff are included, three of the original 34 licensees are still major semiconductor suppliers today. However compared to the changes in the semiconductor industry over the last 60 years, the changes in suppliers is not surprising. The semiconductor market first exceeded $1 billion in the mid-1960s and the major customers were mainframe computers makers (IBM), the U.S. military and the U.S. space program. Today the market is over $300 billion and the major applications include smartphones and tablet computers – unknown devices until about 20 years ago. The market has gone from single transistor devices in the 1950s to billions of transistors on an IC today.