Embedded MPUs will drive overall microprocessor market

Demand for microprocessors used in embedded applications will grow but chip buyers can expect small price declines over the next several years

The worldwide global embedded microprocessor market will post 8.3 per cent annual growth over the next four years as revenue rises from $15.9 billion in 2019 to $23.7 billion in 2024 as demand for embedded MPUs increases from communications, industrial equipment and automotive OEMs.

Despite rising demand, semiconductor buyers can expect steady lead times and modest price declines over the next several years, according to industry analysts. The average price of an embedded MPU is forecast to fall from about $43.31 in 2020 to $41.20 in 2024, said researcher IC insights.

Strong demand for embedded processors is driving sales growth in the overall microprocessor market, which also includes processors used in computers and cell phones. Revenue of embedded processors will increase 10 per cent in 2020 to a record high of $17.5 billion after rising 9 per cent in 2019 and 18 per cent in 2018, the researcher said. Worldwide unit volume of embedded processors is expected to grow 11 per cent to 406 million MPUs in 2020 after rising 7 per cent in 2019 and 14 per cent in 2018.

A number of trends in embedded systems is driving MPU growth, including increased automation in vehicles, industrial equipment and homes, according to Rob Lineback, senior market analyst for IC Insights. In addition, Internet connections are becoming pervasive in a wide range of end use equipment which is driving higher embedded MPU demand.

“Automation and big data analytics to the Internet of Things is increasing the need for embedded computing and processing,” said Lineback. “In a growing number of systems, embedded processing is handling artificial intelligence and machine learning capabilities for autonomous operations without control by humans,” he said. In the future, artificial intelligence is going to drive a whole new wave of innovation in certain areas and will impact system design and result in greater use of embedded processors, said Mike Palma, research manager at IDC Corp.

As a result, sales of embedded processors are expected to grow by a compound annual growth rate (CAGR) of 8.3 per cent as revenue increases from $15.9 billion in 2019 to $23.7 billion in 2024, while unit shipments are projected to increase to 575 million in 2024. In fact, sales of embedded processors have been increasing since 2014. Embedded MPU sales revenue increased 83 per cent from 2014 to 2019, while sales of computer processors grew 11 per cent during the same time. Cell phone application processors sales dropped 5 per cent between 2014 and 2019, according to IC Insights.

Embedded MPU share rises
Robust demand from multiple customer segments will mean embedded processing revenue will continue to grow as a percentage of overall microprocessor sales. In 2014, embedded microprocessors accounted for 11 per cent of global microprocessor revenue, while the computer market represented 58 per cent of the processor market and cell phone processors were 31 per cent of MPU sales, IC insights said. By 2024 embedded processors will account for 24 per cent of processor revenue; computers, 50 per cent and cell phones, 25 per cent.

One reason that embedded MPU demand and revenue will rise is the automotive market. “Automotive embedded processors are expected to see the strongest growth over the next five years with sales rising 14.1 per cent per year, according to Lineback. The industrial segment will post a CAGR of 9.4 per cent and embedded processor revenue from the communications industry, the largest market for embedded MPUs, will rise 8.8 per cent from 2019 to 2024, he said.

Alan Priestly, vice president analyst for Gartner Inc., said the embedded market is fragmented. He noted that in years past embedded processors were used mainly in the industrial market. While embedded processors are still used in industrial equipment, the market for them is expanding, he said. They are now used in everything from industrial controls, cars, transportation systems, mil aerospace market, switches, routers and high-performance devices and consumer electronics equipment, he said.

For instance, microprocessors are being designed into more vehicles, as cars and off-road vehicles are equipped with sophisticated systems such as advanced driver assistance systems (ADAS). In some cases, MPUs are replacing microcontrollers in vehicles as control of automotive electronics systems becomes centralised.

Priestly said there are about 50 MCUs used in the average vehicle for brakes, air-conditioning, instrument panels, security, door locks and other systems. However, the automotive industry is moving toward “centralising its processing resources and that is driving more demand for high-performances embedded processors in the car” which will mean fewer MCUs will be needed, he said. There will be several processors because the need for redundancy in a vehicle. With central processing there needs to be backup systems in the event of a system failure. Backup systems require microprocessors.

Long life cycles
Of course, embedded processors are being used in many more non-automotive systems as well because they have the same computing power as processors used in computers. “Embedded processors are essentially the same as a standard processor used in computer system, but they typically have longer product lives and extended environmental specifications,” said Priestly.

For instance, an embedded microprocessor may be used in a piece of industrial equipment in an environment where the temperature may rise or fall sharply and the processor needs to function in very hot or cold conditions. As a result, embedded processors have to be “optimised” to handle different environmental conditions, said Priestly. That means embedded processors often have higher price tags
than a similar functioning MPU used in computers.

Embedded processors are also used in equipment that tend to have much longer lifecycles than a personal computer, said Priestly. For instance, an industrial control or mobile base station may be in use for 10 to 15 years. Automotive, industrial, medical devices medical imaging devices can have product life cycle of up to two decades.

If there is a field failure, the microprocessor in the equipment may need to be replaced so manufacturers will build embedded processors for longer period of time than processors used in computers. In the embedded market you have to support a longer lifecycle.
“Your average PC has about three- or four year-lifecycle,” said Priestly. “The vendors that make PC processors refresh them very rapidly, and after 18 months or two years, you can’t buy the old generation processors anymore,” said Priestly.

Embedded processor manufacturers “charge more, but they guarantee the extended availability of the product,” he said. Prices are also higher because volumes are much lower than for processors used in computers and cell phones. Billions of MPUs are shipped for computers and cell phones while thousands of embedded processors ship each year. “So, there are premiums on embedded products,” said Priestly.

While prices for embedded microprocessors may be higher than other processors, there are a number of suppliers that compete for business. Intel, which is the largest microprocessor manufacturer, has about 50 per cent of the embedded MPU market, according to Gartner. As with its processors used in computers, Intel’s embedded processors are based on x86 technology as are AMD embedded processors.

“A lot of x86 PC class processors wind up in a whole range of embedded systems from POS systems, digital signage, kiosks, industrial equipment, medical equipment, and lower performance ranges of servers, said Palma.

There are a number of processor companies that use ARM technology including, QUALCOMM, Nvidia, HiSilicon, Samsung and NXP among others.