Technology Blog

Video: Industrial electronics as the top semiconductor application in the next few years

LED lighting, video surveillance, manufacturing automation, and other applications are spearheading solid growth in the industrial semiconductor market.

Robbie Galoso

Interview Transcript

The industrial electronics market

The worldwide industrial semiconductor market is currently 33 billion dollars per year and is expected to grow double-digits in 2014. In 2012, the market declined. But then it recovered in 2013, growing 9%. As of the second quarter company financial results, the industrial market recovery is going very strong. In fact, a lot of the companies are stating double-digit growth rates. My 2013 to 2018 compound annual growth rate forecast for the industrial semiconductor market is a solid 7.3%.

Bigger than wireless and automotive

The industrial electronics market growth run rate has been quite impressive. Five years ago it was hard to imagine that industrial electronics would be the number one application to drive semiconductors. In fact, five years ago industrial electronics was labeled as a segment that lacked innovation and a lot of companies would take it for granted. But now the competitive landscape has shifted and more and more companies are focused on industrial market share growth and taking away from other application markets. In fact, a lot of companies are now increasing their R&D, their capital expenditures, and putting it in industrial. As of 2009, well in 2009, the semiconductor market for industrial was 20 billion and we expect it to grow to 40 billion in 2016. So that's basically – in seven years – doubling the growth of industrial electronics.

Key growth drivers for industrial electronics

The industrial electronics market is growing because of different factors. First is the economy. During the global recession of 2009 and 2012, industrial electronics was hit pretty hard. In fact, the following year when the headwind softened, industrial electronics took off. The stabilization of the US housing market, the improved finances, improved credit, and increasing capital expenditures has improved the industrial equipment demand. Second, in terms of regional growth, both US and China are driving at owning historical revenues but in the long run; China being the prime destination for outsourcing given the lower labor cost and the number one consumer of semiconductors; and then you have the US with the most number of industrial OEMs. In terms of segments that are really boosting industrial equipment demand, there are a variety of segments. Essentially, it's a broad base. So you've got LED lighting, to video surveillance, to several segments in manufacturing automation, to application market tools, to even locomotive trains. There are overall just increasing the demand for industrial equipment.

Robbie Galoso Principal Analyst, Industrial Electronics, IHS Technology