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Home > Nanotechnology Columns > Bourne Research > MEMS Revenues: A Sneak Peek at the Next Five Years

Marlene

Abstract:
Sales of MEMS devices reached record levels in 2007, but the days of double-digit revenue growth may be over; at least for the time being. Here's why.

May 12th, 2008

MEMS Revenues: A Sneak Peek at the Next Five Years

My 8th annual MEMS forecast is now available, which predicts a compound annual growth rate of just 5.5% over the next five years. That's fairly reasonable considering sales of MEMS devices reached $8.6 billion in 2007. I have many reasons for such low revenue growth: car production in the US and Europe is down, sales of consumer ink jet printing cartridges are at a near-halt, and digital TVs based on MEMS saw some hard times last year. These are three of the biggest applications for MEMS devices, so what happens here matters. A lot.

In addition, as MEMS devices move further into consumer electronics (CE), industry is going feel the shifts the CE market experiences more deeply; until this point, the MEMS industry has been fairly immune. As such, basic economic conditions are coming into play and have to be taken in to account - the severe housing downturn, the mortgage crisis and its effect on Wall Street, record oil prices, food price increases - these are leading to recessionary conditions within the United States, one of the largest end-use markets of MEMS.

In fact, I was wondering last week if the lipstick theory would come into play at some point. This is something I've known about for years, and sure enough Leonard Lauder, head of cosmetic giant Estee Lauder, was interviewed about it recently. It's a theory that economists find legitimate, although there's no real hard data behind it, and its basic concept is this: as the US economy moves into a recession, lipstick sales increase. This is because women are no longer spending large amounts of money on clothes or shoes, so spending $20 or so on a tube of lipstick is low-cost way to buy what feels like a luxury.

Given the tentative state of the economy, manufacturers are increasingly focused on improving efficiencies and reducing energy costs. This is where I've seen the greatest movement and sales increases for MEMS; and it shows in the numbers. Sales of MEMS sensors for use in industrial automation surged in 2007, and are expected to remain strong for the foreseeable future - especially as sensing within manufacturing environments make the switch from wired to wireless systems.

Going back to the consumer electronics market, it's a double-edged sword, particularly cell phones. With some 1 billion units sold annually, yes, it's a fabulous end-use. But I think there's a "if you build it they will come" mentality as it pertains to the rush to push the price of MEMS sensors down to ever lower levels - meaning if you make the price low enough, then everyone will buy one. But what's the need? Where's the value? The use of MEMS sensors in cell phones is a novelty right now - and given current economic conditions, the interest of cell phone manufactures to integrate them may slow. Then again, I could be wrong; maybe novelty is exactly what handsets need to push sales. But, the consumer simply isn't in much of a mood to buy right now.

Even so, the bottom line is that MEMS accelerometers are quickly becoming a commodity. So, the total level of revenues generated will be great for a few companies, but only a few. And the impact of that revenue to the overall MEMS industry will be negligible. Plus, there will be a period of time when unit shipments don't offset the low prices, and growth stagnates. We're at that point. Don't get me wrong, I'm certain that at least one MEMS sensor will eventually be in pretty much every cell phone sold - but for the reasons above, I just don't believe it will happen in the next five years, especially considering that just .01 percent of cell phones have such sensors today.

I'm an enthusiastic supporter of all things MEMS. It's just a tough market right now as industry transitions from high-priced devices with relatively modest unit shipments, to very low-priced devices with extremely high unit shipment volumes. Once that takes place, the sky's the limit.

In this week's radio show I'll talk at length about how ink jet printing is trying to shift away from consumers to industrial applications - and the market is evolving in some fascinating ways. We'll also hear about exoskeletons, a device that gives you super strength, as well as MEMS and the Olympic torch, hip replacement, and a possible cure for baldness.

You can listen to the entire show on bournereport.com or look for Bourne Report Radio in iTunes.

This article is a transcript of the Bourne Report Podcast #93.

Want to know more? Please visit: http://www.bournereport.com

2008 Bourne Research LLC. All rights reserved.

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