COLORADO SPRINGS, Colo. " VITA (formerly VMEbus Industry Trade Association) has published a special addendum to its 2008 State of the VME Industry white paper, warning of destabilizing trends in the semiconductor industry serving single-board computers, and confusion in the strategies of board manufacturers themselves. VITA Executive Director Ray Alderman said that military markets and commercial off the shelf markets serving mil-aero remain potentially lucrative, but telecom and industrial markets will be driven by commodity factors that could hurt many chip and OEM players.
The changes are due not only to the overall softness in the 2008 economy, the study said, but to fundamental shifts in the application markets. The military's turn to autonomous systems for communication and intelligence has made that market stable, Alderman said, but OEMs in telecom are falling victim to heavy pressures among service providers. The study predicts mergers and acquisitions among telecom equipment manufacturers at "fire sale" prices.
"Most disturbing is the state of wireless in the U.S.," the study said. "Cellphone subscriber growth dropped to 7.9 percent this year Consequently, the prospects for additional US telecom system buildout continues to degrade."
While military IC customers made the most noise this year about Apple Inc.'s acquisition of PA Semi, the larger problem for OEMs in mil-aero and high-performance industrial systems is that more than 50 percent of all semiconductors are going into consumer devices for the first time. This puts heavy pressure on ruggedized parts, specialized high-performance devices, and custom processors. At the same time, FPGAs are finding wider use in I/O as well as control-plane applications. At the end of the day, this will accelerate M&A's in the semiconductor industry and reduce the number of suppliers, the study warned.
Alderman said there are only two successful strategies for board companies to follow: either be a semiconductor-driven supplier to commodity markets, or a specialized custom hardware supplier to boutique markets, utilizing FPGAs and multi-core designs.
Even the formerly steady-growth industrial segment will see instability stemming from a wealth of new form factors. Alderman listed two postulates regarding form factors: the larger the form factor, the lower the gross profit margin of the products; and the larger the form factor, the fewer the number of board suppliers. Consequently, the study sees good opportunities for mezzanine cards, PC104, and COMexpress.
More details are available at www.vita.com.