Thursday, August 27, 2009

Image sensor market enters a more cyclic phase

It took the recession of 2009 to do it, but the image sensor market will finally take a dip after many years of steep growth. And, not only has the market contracted for the first time since we first started tracking image sensors in 1996, but a rockier period waits ahead.

Image sensors have a long history, dating back to fax machines and video cameras, but the recent steep run is largely thanks to the cameraphone. The cameraphone provided a convergence of factors that drove revenues to steep double-digit levels: a simultaneous swelling of handset sales worldwide, growing adoption of cameras in handsets, and rapid migration toward greater pixel counts in those cameras.

Now handset sales are taking a breather, dropping an expected 10% in unit sales this year. Other segments are also seeing declines, of course, and unit prices for the image sensors are relentlessly competitive.

The figure shows the long steep ride on a log scale, from our new report. The log scale makes it easy to see the change in growth rate (a chart with a linear scale is in our press release). What's remarkable, perhaps, is that the market decline this year won't be more severe than it is already.

We still expect single- and low double-digit growth in the recovery, and there are still many new opportunities for growth in unit sales beyond that. The two most notable are automotive and webcams. But, it gets more and more difficult to drive revenues up when it’s already near the $7 billion mark. Without the fortuitous convergence of rising cameraphone sales to drive the market forward, cycles will become more prominent.

By the way, it's not that the suppliers have had an easy time of it up to now. (Sound familiar, anyone?) But that will be a topic in a later blog.

Tuesday, August 25, 2009

What it takes to drive LED replacement bulbs

What does it take to drive a market to high growth in the middle of a recession? Being a drop-in substitute for an existing product helps. Having a feature that no other technology can do helps, too. A government mandate also helps. If all three happen at the same time? Then the odds improve that strong growth will happen. That’s what’s happening in the LED replacement bulb market, as described in our recent report.

Contrary to what you might think, the lighting market has never been completely static. There is a wide range of options for light sources, electronic drivers, and fixture designs, and they continue to evolve. But the sockets themselves are slow to change, since they involve network effects, a form of chicken-and-egg problem. That’s where the drop-in substitute comes in. LED replacement bulb are selling today as substitutes for certain high-value applications.

What high-value applications? That’s where the unique feature comes in. LED bulbs can’t compete with compact fluorescent bulbs for general ambient lighting. But for directional lighting, LED bulbs are superior for controllability, dimmability, and a choice of color temperatures.

Why not use the existing technology? The government mandate requires that all bulbs achieve a certain efficacy over a coming phase-in period. While this doesn’t ban incandescent bulbs outright, it does price ordinary incandescent bulbs above more efficient CFL and LED bulbs. A perfect convergence.

By the way, the terminology in this area can be confusing. The figure shows how the LED replacement bulbs fit into conventional fixtures to complete a luminaire. The eventual goal is to migrate to complete designs where the LEDs are integrated into the luminaire from the get go. (See our market report on LED luminaires.)