The power-supply and power-management IC market witnessed perhaps the worst year ever in 2001. From 1998 to 2001 the market grew at nearly a 30 percent annual growth rate in worldwide shipment revenues. This growth ended abruptly last year when the market saw a 19 percent decline in dollar-volume shipments. Average selling prices declined 14 percent as suppliers, distributors and OEMs all tried to reduce their overstocked inventories. The root causes for this dramatic market decline were excess inventories, overproduction, declining OEM demands and marketplace uncertainty.
Looking forward through 2006, power-supply and power-management IC shipments by dollar volume are not expected to regain the revenue level of year-end 2001 until 2004. Quarterly revenues may reach 2001 levels by the third or fourth quarter of 2003.
We expect the dollar-volume market to grow at about 4 percent in 2002 and to see continuing growth through 2006. The unit-volume market is expected to grow at about 5 percent in 2002 and to see slightly higher growth through 2006 than the dollar-volume market. This lower dollar-volume forecast rate in 2002-2006 reflects expected erosion in average selling prices (ASPs) due to advances in technology and manufacturing efficiencies, as well as the supply-and-demand effects of increased production capacity-a trend that is typical of the semiconductor industry.
Factors that are expected to contribute to the market recovery include increasing demand for higher-efficiency portable electronics; increasing involvement of governments to improve efficiencies, decrease harmonic emissions and increase use of power-factor correction (PFC); increasing development and adoption of power-management standards and initiatives; and a market recovery in computer-product and telecommunication- product applications.
The power market consists of the following eight principal product categories: ac/dc regulators, PFC preregulators, pulse-width and pulse-frequency modulated (PWM/PFM) controllers, dc/dc regulators, linear regulators, battery-charging and battery-management ICs, hot-swap controllers and MOSFET drivers. Worldwide compound annual-shipment growth rates for these principal product categories, as well as 14 subcategories, are forecast to run from about 9 percent to 24 percent in shipment-revenue growth, and from 12 percent to 29 percent in unit-shipment growth, for the next five years. The battery-charging and management IC categories tend to be the higher-growth product segments, due to the increasing use of battery-powered portable electronics, especially portable computers and communications products.
The power-supply and power-management IC market has experienced a lot of change over the last three years in terms of supplier competition. In 1999 and 2000 there were a total of 15 spin-offs, acquisitions or mergers specifically relating to power-supply and power-management ICs. In 2001 there were only four mergers: Maxim Integrated Products Inc. and Dallas Semiconductor Corp., Vishay Intertechnology Inc. and General Semiconductor Industries Inc., Fairchild Semiconductor International and Impala Linear Corp., and Microchip Technology Inc. and TelCom Semiconductor Inc. So far in 2002, Intersil Inc.'s acquisition of Elantec Semiconductor Inc. leaves a total of only 90 power-supply and power-management IC suppliers worldwide.
This trend toward consolidation is also exhibited in changing market shares among the top players. In 1998, the top five power-supply and power-management suppliers accounted for 35 percent of the marketplace. After the flurry of acquisitions/mergers in 1999-2000, this figure rose to over 40 percent, demonstrating industry consolidation. However, this figure contracted to 37 percent in 2001 as many of the larger players struggled in the down economy. Despite a definitive industry trend toward consolidation, 2001 represented a minor setback to that trend.
Power's Big Eight
Though approximately 90 companies participate in this market, the top eight vendors account for more than 50 percent of the global merchant shipments of these ICs. In fact, the 80/20 rule applies to this market, with 79.6 percent of 2001 revenues attributed to the top 20 percent (18 suppliers) of the IC manufacturers. The overall leaders in the global power-supply and power-management IC market are Texas Instruments, Linear Technology, National Semiconductor, ON Semiconductor, Fairchild Semiconductor, STMicroelectronics and Maxim.
The Asia/Pacific region experienced a significant increase in market share in 2001. This was primarily at the expense of North America and, to a lesser extent, Japan. As the market declined, OEMs consistently cut production at North American and Japanese facilities. Asia is expected to continue to gain share, especially with the emergence of China as an attractive location for electronics manufacturing. This global shift in production to the Asia-Pacific region is expected to run through 2006, when Asia-Pacific is projected to reach over 41 percent of the global power-supply and power-management IC market.
In 2001, there were significant shifts in distribution channels. As distributors emptied their inventories of commodity-type products during the first part of last year, sales through distributors for new products declined rapidly. Distributor dollar-volume sales declined 29 percent during 2001, lowering their market share 5 percent. This loss in market share was primarily made up through direct sales, although dollar volumes still declined 9 percent during 2001.
Moving forward from 2001, vendors will continue to place emphasis on direct sales as well as on sales through distributors. Shares of sales through manufacturers' representatives will increase as well, mainly due to the expansion of the Asian market.
Application markets for power-supply and power-management IC shipments are forecast to grow between 8 percent and 14 percent over the next five years. Computers and telecommunications are expected to be the fastest-growing segments, and these also will drive technological advances.
In 2002, power-supply and power-management IC suppliers will have the chance to leverage the results of a disastrous year to their individual advantage. Suppliers should be looking for potential strategic acquisitions, mergers and partnerships. Last year was trying, and many suppliers are in difficult financial positions and may be acquired relatively cheaply.
Indeed, power-supply and power-management IC suppliers were devastated in 2001, but have begun to see a change for the better in 2002. As this trend continues, let's hope that these vendors can learn from the past and keep another 2001 landslide from occurring.
Nathan Andrews is an Analyst at Venture Development Corp. (Natick, Mass.).
