Industrial semiconductor forecast
The industrial segment is the third–fastest-growing semiconductor segment after automotive and communications. PricewaterhouseCoopers (or PwC) forecasts that the industrial semiconductor market will grow at a CAGR (compounded annual growth rate) of 9.7% between 2014 and 2019. The industrial semiconductor market is highly correlated to the macroeconomic growth and capital spending of industries.
As the economy recovers through 2019, the industrial segment’s growth will outpace that of the overall semiconductor industry, which is expected to grow at a 5.2% CAGR during the same period. China and the United States are key markets for industrial semiconductors. Let’s look at the factors that will drive growth in this area.
Industrial semiconductor products
Industrial semiconductors are used in several applications, including manufacturing and process automation, power and energy, medical, test and measurement, building and home control, and military and civil aerospace.
Key growth drivers for industrial semiconductors
According to PwC, the demand for industrial semiconductors will be driven by the LED (light-emitting diodes) lighting sector, security, energy management, and medical devices.
PwC expects LED lighting sales to grow at a CAGR of 30.2% during the 2014–2019 period.
IC Insights forecasts global medical semiconductor sales to grow at a CAGR of 12.3% to reach $8.2 billion in 2018. Of these sales, IC (integrated circuit) sales are expected to grow at a CAGR of 10.7% to reach $6.6 billion in 2018, and optoelectronics, sensor/actuator, and discrete (or O-S-D) sales are expected to grow at a CAGR of 20.3% to reach $1.6 billion in 2018.
Mergers and acquisitions
The segment has seen its share of consolidations. Two merger deals have made the news due to competitive bids. Microsemi (MSCC) outbid Skyworks Solutions to acquire PMC-Sierra (PMCS) after three rounds of the offer. Another bidding war is expected to spark, as Fairchild Semiconductor (FCS) has received an unsolicited proposal that competes with ON Semiconductor’s acquisition proposal.
In the next part of the series, we’ll look at the data communications segment of the semiconductor industry. The Technology Select Sector SPDR ETF (XLK) has exposure to the semiconductor supply chain and its customers. It has 0.36% exposure in Skyworks Solutions (SWKS).