Tis the perfect time to be an analog semiconductor design engineer. And analog IC supplier. Demand for analog ICs is not just robust – like for most other semiconductor components – but analog chips are enjoying a sort of renaissance with its use now extended throughout all segments of the global economy. Analog ICs are being designed into a wider range of products driven by the growing penetration of semiconductors outside the traditional PCs, communication and networking equipment markets.
Sales of analog ICs are surging at the leading vendors with the Top 10 manufacturers reporting strong double-digit revenue increases in 2021 over the prior year. Texas Instruments was the top supplier last year, controlling just under 20 percent of the market while Analog Devices, the No. 2 vendor, increased its share to 13 percent, according to market research firm IC Insights. The Top 10 companies, including Skyworks Solutions, Infineon and ST (numbers 3, 4 and 5, respectively), together represent more than two-thirds of the market.
Interestingly, the race to digitalize equipment and tools used by manufacturers in fields as diverse as agriculture, industrial, medical and transportation is sparking interest and demand for analog semiconductor components and engineers. Companies that want to increase cost-savings and productivity improvements in their operations are replacing mechanical equipment with electronic products. Industry executives said they are seeing demand for electronic equipment from a widening swarth of the economy, especially in areas that were not traditional consumers of semiconductors.
Areas of growing interest and demand for analog ICs include power management, industrial and motor control, optical data communication and consumer applications, according to IC Insights. These are in addition to areas such as robotics, which is becoming a big part of analog IC vendors’ sales due to their use in industrial settings as well as automotive production.
“Analog ICs remain a critical component in nearly all digital-centric systems,” said IC Insights in its second quarter Update to the McClean Report issued in May. “The analog market typically grows (and declines) at a more tempered rate than the total IC market, but that was not the case in 2021. The analog market grew by 30% last year, while the total IC market increased 26%. Every general purpose and application specific analog product segment enjoyed double-digit sales growth in 2021. Signal conversion revenue grew 13% last year, but revenue in every other analog IC category jumped by at least 27%.”
The forecast is for continued strength in the analog market with sales likely to outpace the general semiconductor market this year. The World Semiconductor Trade Statistics (WSTS) projects chip revenue will increase 16.3 percent in 2022. However, analog IC sales are seen rising 19.2 percent during the same period. Total analog semiconductor revenue for 2022 will increase to $84.54 billion, from $74.1 billion, in 2021, according to technology data provider Statista.
It would seem no segment of the economy is immune to the analog penetration. The transition to electric vehicles, which is predicted to consume more semiconductors, is adding to the demand for analog ICs. But it is not just sophisticated equipment that are seeing rising demand for analog chips. Even hobbyists have joined in the use of electronics, including for personal navigation, home safety, consumer products, health and sporting equipment. Demand for analog design engineers have risen as a result, observers said.
“The use of analog IC in medical and healthcare electronics, green energy management for domestic and commercial buildings or premises fuel the growth of the IC market globally,” said Allied Market Research, in a report. “The use of electronics in sophisticated engine and safety controls, navigation, audio/video systems, hybrid electric drives, and LED lighting in the automotive industry is expected to increase the demand for analog ICs.”
Industrial and Robotics
Observers said the global economy is moving into a new cycle, dubbed “industry 4.0” with companies installing equipment infused with wireless and networking capabilities. The long-predicted surge in demand for Internet of Things (IoT) devices is finally here and it is spreading to all economic segments, fueling the growth of the analog market, according to Vincent Roche, chairman and CEO, Analog Devices. In a presentation to analysts, Roche noted that ADI is fielding calls for customers beyond its traditional markets, adding that the company is having to race to support these new buyers.
“The growing scope of our customers’ products is dramatically expanding in complexity and pressuring their product development teams and innovation cycles,” Roche said. “Our technology is intersecting with our markets. Industries like transportation, energy, telecoms, manufacturing and health care are prioritizing digitalization. This is driving new generations of applications and fueling a host of concurrent secular growth trends.”
ADI is putting emphasis on the robotics market because of changes in the industrial market where companies are seeking more automation. The tasks that manufacturers are assigning to robots have increased due to safety concerns and the improved productivity they get from the devices. Advances in robotics have meant robots can be deployed in a wider set of activities and industries, including in the cleaning and disinfection of manufacturing floors, packaging and distribution centers and other areas where companies need greater flexibility. These robots are coupled with and collaborate with human employees, according to industry sources.
“Traditional industrial robots like those seen at auto manufacturers, operate at high speed and often with very large payloads, so they need to be separated from humans using safety cages or light curtains [but] these types of robots are continuing to advance, demand higher precision motion control, improved multi-axis synchronization, and size and power efficiencies,” said Nicola O’Byrne, strategic marketing manager for connected motion and robotics, at ADI, in a report. “Collaborative robots (cobots) are also on the rise and are enabling automation of tasks that were previously only possible with humans. This leads to more manufacturers adopting automation where they previously could not afford to.”
The chorus across the analog market is that demand for the components will remain strong through the rest of this decade. In fact, the leading suppliers are as a result expanding their production capacity and adding design engineers to support customers. TI, for example, has jacked up its capital expenditure to levels not seen since the turn of the century and plans to spend as much as $30 billion on new fabs over the next years. The company is adding 300mm fabs to gain scale and efficiency, according to chairman and CEO Rich Templeton.
“The real magic of 300-millimeter wafer fab is [the efficiencies gained from the] 300-millimeter fab, not what you paid for it,” Templeton said, during a presentation at the Bernstein Strategic Decisions Conference earlier in. “The rates of return that we will be able to achieve, the cost that we will be able to achieve, they are going to be everything that we have ever seen …. We are going to be thrilled with what that looks like.”
TI is so bullish on the analog market that the company is not just adding new fabs, but it is also laying out an extensive 15-year plan, which centers on the use of older nodes. The company said its customers will require chips made on 45 nanometers to 130 nanometers for decades and has plans in place to service them using existing and new infrastructure. Even as some companies have been warning of a slowdown in economic activities due to inflationary and energy pressures, TI will continue to hire analog engineers, Templeton said.
“You’ve seen tech companies talk about slowing hiring, and I get asked, ‘are we slowing it?’ Templeton said. “It is not like we never sped it up. We are not slowing it. We are going to run it on a very, very steady basis regardless of what revenue does and that really is the right way to think about it.”