Sensor market to grow despite price declines – By James Carbone

Double-digit increases in sensor unit shipments will result in continued robust sales growth in worldwide sensor revenue

Semiconductor buyers can expect prices for sensors to decline an average of 2.5 per cent per year through 2022, despite annual double-digit increases in demand driven by automotive, industrial and smart phone applications.

The average price of a sensor will decline from $0.39 in 2017 to $0.34. Despite falling prices, the overall global sensors market will increase from $8.5 billion in 2017 to $12.7 billion in 2022, according to researcher IC Insights. Unit shipments will also rise by about 10 per cent per year.

The bad news for buyers – and the good news for sensor manufacturers – is that price erosion through 2022 will be less than the previous five years. From 2012 to 2017, the average sensor price declined by about 6.3 per cent per year.

“There’s been tremendous reduction in prices of sensors in recent years, but downward pricing pressure now has eased,” said Rob Lineback, senior market research analyst for IC insights.

One reason is that sensor demand is rising because of growing use of sensors in a wide range of customer segments, including automotive, industrial and communications among others. As a result, unit shipments are expected to rise 11.2 per cent per year through 2022, said IC Insights.

The sensors market includes accelerometers and gyroscopes, and field, temperature, humidity, gas, and fingerprint sensors and others.

Automotive continues to grow as an important driver of sensors because more of the devices are being used in conventional gas-powered cars, electric vehicles and hybrids and will be used even more in autonomous vehicles.

The automotive industry is the leading application for pressure sensors, said Lineback. Pressure sensors are for fuel injection in engines and in exhaust systems. Accelerometers are also needed in exhaust systems, and stability control systems.

Automotive was the biggest driver of sensors from the mid-1990s until 2010 or so, said Lineback. “All of a sudden smart phones became the place to be for sensors.” Smart phones and other consumer products impacted the cost structure for sensors and manufacturers had to cut prices, he said.

Automotive dominates sensor market

But smart phone sales in recent years have been sluggish and the automotive market “right now is again the biggest driver for sensors,” said Lineback. In fact, automotive represents 38 per cent of the global sensors market, while communications, including smart phones accounts for 15 per cent of global sensors revenue. Industrial, which includes medical, commercial systems and factory automation accounts for 19 per cent, said IC Insights. Consumer segment, including wearable electronics such as FitBits and smart watches, make up 14 per cent of the sensors market.

Automotive will likely dominate the sensors market due in part to the development of the autonomous, or self-driving vehicle.  Automakers and other companies have announced
plans to develop autonomous vehicles. Researcher Gartner said there should be multiple launches of autonomous vehicles around 2020. However, the full impact of autonomous vehicle technology will not begin to emerge until approximately

Autonomous vehicles will further drive sensor demand because they are expected to have 50 per cent more sensors than a standard, human driven car, said IC Insights.  “It’s pretty clear that if we are really going to have these cars fully autonomous, we we will see a lot of growth for sensors,” said Lineback.

The number of autonomous vehicles is expected to grow significantly from 2020 to 2030 and Gartner estimates that autonomous capable vehicles will represent approximately 25 per cent of passenger vehicles in 2030.

While many sensors will be used in autonomous vehicles, sensor content in standard cars and trucks will also increase because of advanced driver assistance systems (ADAS) such as lane centering, automatic braking, self-parking and other safety features. Sensors are needed for those system to operate.

“Automotive will be a big user of sensors regardless of whether vehicles are fully autonomous or not,” said Lineback.


Sensors help phones be smart

While automotive will drive sensors sales, smart phones will also remain a “a big platform for sensors” because they are critical to the functions of iPhones, Androids and other smart phones. For instance, Apple’s iPhone X contains five sensors from four different manufacturers including Bosch, ALPS, AMS and STMicroelectronics. The phone uses accelerometer/gyroscope, compass, pressure, light and proximity sensors, according to researcher IHS Markit.

Sensor sales will likely increase when 5G cellular networks go into operation. More smart phone users will upgrade their phones to take advantage of 5G network capability which will of course further drive sensor demand as well as other semiconductors.

Besides smart phones and automotive, a lot of factory automation industrial equipment contribute to sensors demand growth. “A lot of robotics will be using a lot of sensors,” said Lineback.

Automotive and industrial are the
two biggest customer segments
for sensor manufacturers
Source: IC Insights

Focusing on sensors

Because sensor demand is rising, buyers can expect more chipmakers to focus on sensors. “The sensors business is a good one and there are some companies that are trying to expand their presence,” said Lineback. For instance, Japanese electronics company TDK last year acquired InvenSense, a supplier of motion, ultrasonic environmental and other sensors.

Despite strong growth in demand, there should not be any serious supply issues with sensors. Lead times are mostly stable for most types of sensors. In the first quarter, NXP’s sensor lead times were in the 8 to 16-week range, while Infineon’s were 18 to 26 weeks; Bosch, 12 to 14 weeks; Vishay, 14 to 18 weeks in STMicroelectronics 14 to 20 weeks.

“Prices are stable, but there are increasing lead times for pressure sensors, but still well within the lead time of the other components,” said a purchasing manager at an electronics manufacturing services provider.

Some sensor companies are integrated device manufacturers (IDM) and make their own sensors, while others outsource production to foundries. More sensors are being produced by foundries rather than in-house.  Both IDMs and foundries are adding capacity.

“There has not been a problem with capacity,” said Lineback. A lot of capacity has transitioned to 200 mm wafers. The move to larger size wafers is good news for buyers because manufacturers can get more usable die from 200mm wafers than 150mm or other smaller wafers.

“There’s also a lot of older IC fab equipment that is not being used for ICs and is being turned over to sensors and discretes, said Lineback.

Although unit demand for
sensors will increase, the average
selling price for sensors will fall
Source: IC Insights

He added that many sensors are combined with an integrated circuit in a package. “The tricky part for sensors is on the packaging side. They (sensor companies) do a lot of subcontracting on that,” said Lineback.

Because of strong demand, the sensor industry is healthy. However, to reduce risk buyers should make sure their sensor suppliers don’t rely on one or two customers bulk of their business.

Lineback said some sensor companies have “gotten themselves in trouble by hitching their business too much to one company.” For instance, InvenSense, before it was acquired by TDK, had strong sales and supplier sensors in the iPhone. A large percentage of the company’s business came from Apple and Samsung.

When there was a slowdown with Apple products InvenSense had some difficulty and was later acquired by TDK.