Power IC Opportunity: Where Moore's Law Meets the Limits of Electrochemistry
CIR's research indicates that most manufacturers of Power ICs for mobile electronic devices, such as notebook computers, cell phones, PDAs and portable DVD players, believe they have very attractive opportunities open to them over the next decade as the mobile sector grows and its power management requirements become more complex and more demanding. Competitive forces are driving OEMs to add features to their mobile products at an accelerating rate, along with better displays and more powerful processors. These new additions are a big drain on battery power at a time when the energy density of Lithium-chemistry batteries is increasing at just a few percentage points a year, and mini fuel cell which promise a lot more power in a small package are several years from widespread commercialization. The new features and functionality are also highly demanding on power distribution, since they lead to a veritable zoo of voltage rails within each power device.
In other words, Moore's law is enabling the mobile OEMs to add features and functionality to the products that they sell, but at the same time the power and power management needed to support these additions is at a premium. The conventional wisdom has it that much of the future revenue potential for the Power IC industry will derive from this conflict. Manufacturers of Power ICs and related products see their opportunity in enabling mobile OEMs to enhance their products, while maintaining small product size and low weight. Like most conventional wisdom, however, this view is only half correct. We believe that, while it is most certainly true that the opportunities for power- management companies depend on the gap between the functionality required by mobile electronics devices and the power available to drive them, we think that it is unrealistic to believe OEMs will keep adding features forever or that battery technology will always be as limited as it is now.
As both electronic device feature and functionality trends and battery trends change, so will the market for mobile Power ICs. In this White Paper, we sketch out our view of where money will be made in the mobile Power IC business in the future. The analysis is fleshed out in CIR's new report: Power ICs in the Mobile Device Market: A Five-Year Forecast of OEM Requirements, which contains quantitative projections of Power ICs for all the main mobile electronics devices.1 This report will soon be available for purchase from CIR.
It's Not the Screen, It's the Wireless
Of all the features that are being added to mobile electronics devices, improved displays are getting the most attention from the Power IC industry. This is easy to understand. In a typical notebook, today's LCD display accounts for about 33 percent of the power consumption. No other subsystem comes close. In handheld and cell phone design, the big power concern is the new generation of color displays, which are not only intrinsically harder on the battery than the black and white displays of yesteryear, but are also left on longer to accommodate enhanced features such as Internet access and gaming. (By contrast, the cooling fan on a notebook PC uses only about 4 percent of total power. So, as one source we interviewed for our report told us, "if someone came up with some nano-engineered material, which could eliminate the need for a cooling fan, OEMs wouldn't really care." 2)
But do displays any longer really represent an opportunity for the Power IC industry? The importance of displays is well understood by every mobile Power IC manufacturer and they are all addressing it already, in one way or another. And as far as we can tell there do not appear to be any disruptive power management technologies in the offing that will blow more conventional approaches out of the water.
The one technology innovation that really will have an impact on power management for displays is the advent of advanced LED technology; since according to some sources, LEDs could potentially produce the same amount of light for 10 percent of the power. LEDs will be used at first to replace CCFL lighting for backlighting LCD displays. Later, LEDs will replace LCDs in the displays themselves. It could be at least a couple of years before we see LEDs begin to show some real signs of taking over the display market, and as they do so they will create a new market for the semiconductor industry for LED drivers and power-converter chips aimed at the LED-power environment. However, as LEDs increasingly become the technology of choice for displays, the challenge of displays for power management and the opportunities for Power IC manufacturers in this area will decrease dramatically.
By contrast, we believe that a genuine opportunity for Power IC manufacturers is to be found in the coming proliferation of broadband-wireless interfaces, such a Bluetooth and (especially) WiFi. Although academic researchers have pointed out that the transceivers for these interfaces could be a heavy drain on batteries, most Power IC manufacturers have not addressed this matter to any great extent.3
In addition, the evolution of broadband wireless connectivity for mobile devices is in its beginnings, so nobody really knows what the usage patterns are going to be and, hence, what the power management requirements will look like. So the market is wide open and it definitely will be growing rapidly. WiFi has powerful supporters, notably Intel, which should ensure that virtually all notebook computers will contain WiFi interfaces within 18 months and the proliferation of very low cost 802.11b chipsets, will ensure that more and more cell phones and other handhelds will also contain this interface.
Put Not Your Faith in Features and Functionality
Widespread addition of broadband wireless in mobile devices will, we believe, create a new market for advanced Power ICs. It is even possible that unexpected enhancements will arrive on the scene, with much the same effect. However, although not widely acknowledged by the Power IC industry, history strongly suggests features and functionalities are virtually certain to decline in importance as a market driver within a few years.
The particular history we are thinking of is that of the small-business telephone system market. In the late 1980s, this part of the telecommunications industry went through a huge boom as the advances in microelectronics produced price/performance improvements that enabled small- to medium-sized businesses to abandon their key systems and deploy what were in effect small PBXs instead. The market grew crowded with vendors, but since a PBX has only one key function -- to switch and direct call -- vendors had to look for new features to make their products stand out from the crowd. Some of these features were genuinely useful and marked a real improvement over the key systems that came before. But these were soon adopted by all system vendors and ceased to be competitive advantages. Others features were profound, but proved to be blind alley -- turning PBXs into the central voice and data controller, for example. Still others seemed trivial or even desperate -- having half a dozen versions of the hold feature. Eventually, the marketing strategy of adding more and more secondary features to small-business telephone systems ran out of steam, and the market matured quite rapidly. Today, the business-telephone system competes mostly on the reliability of its products and quality of after-sales service.
To date, the mobile electronic device market seems to be following a very similar trajectory. First the miracles of microelectronics created low-cost radiotelephones, powerful portable computers and high-resolution image/video devices. These were product -- much like small-business PBX -- that had not existed before. We are now in the feature-enrichment stage of the market, where OEMs add more and more to keep their products noticed by their customers.
From Here to Maturity?
Can the maturity phase be far behind and what will that mean to the Power IC manufacturer? Certainly, Power IC manufacturers aren't likely to quit the mobile device market. About 450 million cell phones are now sold every year worldwide and with short product lifetimes for handsets, these unit volumes are going to be maintained even in a relatively mature market. But Power IC manufacturers may no longer be able to derive competitive advantage from finding innovative ways of solving the power management problems of new mobile functionality, but may instead be forced back on the tried and tested strategies suitable for any mature market -- innovations in manufacturing process, building tighter relationships with customers, offering better prices and speedier deliveries. Product innovations will still matter, but they will be mostly found in the form of incremental improvements in the efficiency of power distribution and battery management.
But for Power IC manufacturers this lull in their business may be only temporary. By the time the "feature revolution" has petered out and consumers come to expect cameras in their cell phones as a matter of right, we may begin to see a whole new revolution begin -- the fuel cell revolution. While important marketing and technical issues still need to be resolved with fuel cells, nobody really doubts they are on their way. A vendor as important as NEC will start marketing fuel cells for its laptops as early as next year. When fuel cells take off4 they will change the whole power-management equation that we discussed at the beginning of this paper, which assumed that battery power was a scarce resource.
In a way this will be bad news for the mobile Power IC industry, since its expectations of growth are predicated to some extent on the scarcity of battery power. But there are also opportunities here. For example, as the battery-power-scarcity issue declines in importance, the mobile Power IC market may shift to place greater emphasis on thermal efficiency of mobile electronics. New Power ICs may be required to manage the new power distribution and battery functions associated with fuel cells. In the past two years, the opportunities presented to the Power IC industry by mobile devices have been constrained by the recession in the telecom and computing industry. Today, the industry is looking for profits in the burgeoning of features and higher speed processors in mobile devices. There are real opportunities there -- but as the analysis in this White Paper and the Exhibit below show -- a closer look suggests a bumpy road ahead, but one with plenty of feasting along the way.
Five-Year Opportunity Analysis for Mobile Power IC 5
1. In this White Paper we are concerned with general trends. There are obviously different power management opportunities in the digital cameras segment, which demands occasional, very intense drains of battery power and is growing at 40 percent and in the PDA segment where there are major concerns about thermal efficiency and where the segment is quite stagnant.
2. Although cooling fan manufacturers presumably would!
3. Although one manufacturer of WiFi chipsets, IceFyr, has made low-power consumption a key selling feature.
4. This is not to trivialize the obstacles that will have to be overcome before this can happen. Not only will
the technology have to improve, but also users will have to be convinced that they should regularly pay to
recharge their batteries with fuel capsules after years of recharging their Lithium-ion batteries for free.
5. And possibly other novel electro-chemistries
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