Comment: Chip market positioned for growth in 2010

The semiconductor market in the last decade has experienced two "once-in-a-lifetime" events: the dot-com bust and the global economic crisis. The coming year will bring a return to reality for the global semiconductor market, no longer driven by bubble economics that fostered the illusion of wealth.

Lothar Maier, CEO of Linear Technology

The real driver of global economic growth will no longer be consumers, but rather emerging markets and economies that need infrastructure. So future growth will not be dependent on disposable consumer production.

These important market changes have benefited Linear Technology. The company has been repositioning its product development, manufacturing and sales away from consumer markets in favor of industrial, communications and automotive markets. This repositioning is nearly complete, and has enabled Linear to boost sales faster than before to the current recession and will accelerate sales as we exit the recession.

This company-wide repositioning is clearly reflected in our sales by market segment when comparing 2005 results with our forecasts for 2010. Handsets and consumer markets in 2005 accounted for 28 percent of sales, but in 2010 will only be 9 percent. Sales into industrial, automotive and military/space markets were 42 percent of sales in 2005, and are forecast to be 59 percent in 2010.

The remaining portion of our sales are in the communications and computer markets, which in 2010 will account for 32 percent of sales. This new market alignment has our product revenue concentrated in the markets that will be the analog technology growth drivers.

New automotive opportunities

Automotive has for several years been an area of market and product focus for Linear. The increasing electronic content in vehicles, boosted by new hybrid and all-electric vehicles, will be a significant growth driver for the overall electronics market.

By 2012, electronic content in cars will constitute 15 percent of a new vehicle's cost, and will continue to grow. We are now seeing the early wave of new electronic applications in vehicles, including security/safety, LED lighting, navigation/entertainment, collision avoidance radar, battery management and engine control.

This is just a small sample; complex electronics are no longer reserved only for the most expensive vehicles, but will make their way into many applications that will be required in all vehicles.

One might ask, Will a growing automotive electronic market attract more competitors and evolve into a commodity market like consumer electronics? This is an unlikely scenario for automotive electronics. The electronic content in vehicles is in a state of high innovation, there are countless applications, with few standards, and the requirements for quality and reliability are not achievable by many semiconductor suppliers.