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Feature article Think Small! issue 2, Volume 2:

Taking the pulse of the MEMS industry

by Jérémie Bouchaud

WTC has recently taken the pulse of the mems industry to answer the question: just how healthy is the industry? Over the period of February to March 2007 wtc carried out a global bottom-up survey of the top 60 mems companies, examining for each company the current mems revenues, products, applications and views on the major changes taking place in the industry.
This article showcases the major findings from the survey. Key features are the two rankings, mems30 and mems10 foundries, and the total 2006 market based on shipments.
Texas Instruments still leads the pack by a big margin with its dlp chips. TI established a newrecord in 2006 with turnover of $905m. Following a 8% dip in revenues in 2005, its dlp revenue was up 15% last year. The company’s front projector business remains the main revenue driver. However, wtc expects that its tv business will continue to suffer from lcd and plasma competition.

Inkjet print heads still contribute greatly to overall MEMS revenues. Five companies in the top ten: HP (#2), Canon (#3), Lexmark (#5) and Seiko Epson (#6) with their own print head production, and STMicroelectronics (#7) as a major foundry partner for hp. The automotive sector is the next major revenue source. Bosch (#4) clearly heads the pack with estimated MEMS revenues of $374m. It is trailed by nine further companies jostling for position between Freescale (#10) with estimated $200m and Panasonic (#19) with estimated $102m. Both gyroscopes and accelerometers for Electronic Stabilisation Programmes (ESP) and pressure sensors for Tire Pressure Monitoring Systems (TPMS) were major stimulants for the growth of the automotive mems markets in 2006.

Newcomers to the top 30

    FormFactor (#9), a manufacturer of MEMS-based wafer probes cards, exploded onto the market just four years ago. Its revenues have grown 55% in 2006 to reach estimated $247m.
     FLIR Systems (#25) with estimated $50m is the leader of the fast growing market for microbolometers typically used in industrial, security and emerging automotive applications.
     Melexis (#30) sold in 2006 estimated $28m worth of MEMS sensors such as pressure sensors for automotive applications. Its product palette is expanding fast and includes infrared sensors for luxury cars and more recently gyroscopes.
Two additional companies must be highlighted as a result of impressive growth. Avago Technologies (#8) consolidates its clear leadership in the fbar duplexers and filter business for cell phones. After selling 100 million FBAR products in 2005, it shipped 220 million duplexers in 2006 and doubled revenues to reach rank 8 with $255m. In a similar fashion, Knowles Acoustics (#21) shipped 200 million mems microphones and confirmed its clear leadership in this sector, doubling its estimated revenues to $92m.

Inkjet heads amount to 30% of MEMS market

The inkjet market is still the largest with 30% share of the overall MEMS market. However, from the point of view of the mems component it is a stagnating market, with the industry moving away from disposable mems print heads and most new printers featuring a fixed print head. This is manifesting itself in slow growth in this sector.
Although the four biggies have been left alone for years in this very profitable market, things are changing with a series of new players trying to get their share of the pie (see MEMS news p. 5). Kodak will enter the market this year, leveraging its "photography" brand to establish itself on the high end segment of digital photo printing (see February issue of Think Small!).

Pressure and flow sensors

Inertial sensors

Inertial sensors are neck and next with $1220m. Consumer applications grow fast with use in cell phones and gaming, however automotive still clearly dominate with 70% of the revenue. Contrary to what we expected two years ago, the airbag market is not completely saturated and keeps growing thanks to new markets, e.g. India and China. Unsophisticated sensors, like in the early 1990s, fit in cars costing typically $3000. In developed countries, gyroscopes for esp drive the market growth and will still do so in the next four years. Indeed, penetration will grow from 25% in the us today to nearly 100% in the US in 2010 due to a new ESP regulation.

MOEMS

MOEMS for displays and telecom applications are the fourth largest mems segment, mainly because of dlp. WTC expects ti’s revenue in dlp to surpass the $1bn mark in 2007 for the first time. MOEMS for telecom applications experienced healthy growth in 2006, as companies are benefiting from investment in fiber optical metropolitan networks e.g. from British Telecom and Verizon. As the price of copper cabling rises, it makes fiber optical networks more and more attractive. Mems foundries such as Memscap, Micralyne and Silex and specialized start-ups like Dicon are also profiting from the recovery.

mems10 foundries

WTC's mems10 foundries ranking includes contract manufacturers specializing in mems or having MEMS as a majority business, including Dalsa where MEMS exceeded CMOS in their foundry revenue in 2006 for the first time, but excluding STMicroelectronics foundry activities for hp and Sony for Knowles. Several mems foundries including Olympus, Semefab and Microfab Bremen are chasing hard on the tail of Touch Micro-system Technology (TMT) with revenues estimated between $5m and $7m.
    The group of top ten foundries reflects different realities. One can first distinguish the foundries specializing in high value products, such as telecom infrastructures, biomedical, aerospace and energy. These are typically IMT, Micralyne, Silex, Colibrys, Memscap and Tronic’s. On the other hand some like APM, Dalsa, TMT and X-Fab focus on high volume applications in automotive, inkjet, or even consumer business. The border becomes blurred sometimes as Silex expands to 8", and Memscap grows in the microphone business.
   One can also differentiate the companies shipping wafers (most foundries), and the ones which offer packaged products or full modules as a way to increase margins and lower customer volatility, such as Tronics, Colibrys and Memscap.
    Finally, few of these foundries have a range of standard products in parallel to foundry services. This is the case for Colibrys and Memscap, and more recently Microfab with their own pressure sensor product line. This is a way to increase revenue, but also to become more independent from the customer. This is not, however, a general trend in the MEMS foundry business. Most prefer to remain a pure foundry player to avoid frightening their customers. APM, for example, spun out its standard product business in February.

Is contract manufacturing a profitable business?

IMT overtook APM as the leading MEMS foundry with an impressive leap from estimated $13m to estimated $21m based on contract manufacturing of infrared sensors, MOEMS and DC switch arrays for telecom applications.
Silex enjoyed the largest boost, doubling its revenues to estimated $13m in 2006, largely from sales increases in life science and telecom applications.
The foundry business in not only expanding but also profiting. In the past, Micralyne and Memscap were one of the few companies writing black numbers in the market, however, several companies started to reach profitability on a monthly or quarterly basis in 2005. Furthermore, companies such as Tronic's, Silex, TMT and others experienced profitability throughout 2006. The pipeline of the mems10 foundries is well nourished and should allow for a healthy growth in the next two years.
While most foundries had typically three to five products in serial production in 2006, two to three additional products will emerge for each company in 2007 and another 15 to 60 additional customers are in the R&D phase.

Telecom and biomedical are driving growth of foundries

In terms of mems applications, automotive dominates today due to Dalsa's production of pressure sensors for Freescale, in addition to some activity at APM, TMT and X-Fab. The most significant growth last year was due to telecom infrastructures and bio-medical applications. In optical telecom, MOEMS products, that have been ready for 4–5 years now, are going into production as the demand materializes.
In a similar fashion, big pharma companies, that have been "playing" with microfluidics for two or three years now, are subcontracting production at mems foundries, especially for drug discovery.
In the future, what will be the major propellers for mems foundry business by 2010? Without surprise, the Taiwanese foundries APM, TMT and TSMC expect significant opportunities from Consumer Electronics. But also Silex, Memscap and X-Fab bet on consumer electronics e.g. for contract manufacturing of MEMS microphones. The other foundries, more specialized on high value markets, will consolidate their position in telecom, biomedical, energy, and aerospace and defence.

Limited outsourcing for automotive MEMS

   What about automotive? Contrary to other analysts’ opinions, WTC does not believe that subsystem and component manufacturers will systematically externalize the mems component manufacturing in the future. The investment of Bosch in a 8" fab is a clear sign. The partnership between Dalsa and Freescale only concerns some of the old pressure sensor technology. Freescale will keep the leading edge accelerometer and gyroscope technologies in-house. Most automotive mems manufacturers have investigated this “make or buy” concept and come to the conclusion that it is not more profitable to externalize fab activities.
    Opportunities exist, however, for mems foundries in special cases. When considering to convert to 8" wafers some automotive mems suppliers will choose to use an external foundry already running 8" wafers, instead of building an expensive new fab. Also after buyouts and mergers, when a pure system company inherits a mems components production, this might also be externalised to a MEMS foundry.

Optimistic outlook for foundry business

    To summarize, the outlook is now good for pure MEMS foundries. They all expect significant growth of their businesses in 2007 (at least 30%), as well as several are expanding capacities. TMT tis currently the only 8" foundry in the mems10, but APM and Silex will soon join in the next two years.
   One should also mention larger semiconductor companies like STMicroelectronics and Sony Semiconductor Kyushu Corp (SCK). In contrast to the mems10 foundries which serve from 15 to 60 customers, these companies' MEMS foundry activity is usually focused on a key customer. STMicroelectronics has a strategic relationship with HP for the production of print-head wafers, while SCK is the prime MEMS wafer supplier for Knowles acoustics. Although MEMS is a very small part of the activity, these players actually dominate the mems foundry business in revenue terms. WTC estimates that the MEMS foundry revenues from STMicroelectronics and SCK to be around $240m and $35m, respectively.

In conclusion, WTC says: The pulse of the MEMS industry is beating fast

   The big players are alive and well, especially ti at #1, with DLP revenues recovering after a drop in 2005. The smaller players, such as the foundry companies, are starting to be profitable. Automotive application remains the major engine for growth and innovation in mems. RF and optical MEMS for telecom applications are taking off. Consumer electronics is still young, yet it already makes up for 10% of the MEMS market and contributed significantly to the revenues of seven of the top 30 players in 2006. Consumer applications are not only driving market growth, but also stimulating technological breakthroughs in the front and back end. These breakthroughs are essential for beating the extreme price pressures that go along with this new mass market.