After several months of negotiation and many twists, finally Taiwan-based Hon Hai Precision Industry Co., also known as Foxconn, will officially acquire Sharp Corporation, the over 100-year-old Japanese electronics maker. The boards of Sharp Corporation and Foxconn Technology Group approved a plan for the Taiwanese electronics assembler to buy the struggling Japanese consumer electronics giant for 389 billion yen (US$3.5 billion). This means that Hon Hai will control 66% of Sharp shares from now on. A joint press conference was held on April 2nd in Japan at which both sides shook hands and endorsed the forever marriage.

Despite its recent financial struggles, Sharp remains one of the world’s most innovative display makers and still holds an intellectual property advantage in advanced liquid crystal display (LCD) technologies, particularly for high-resolution low temperature polysilicon (LTPS) smartphone displays, low-power oxide LCD panels and extra-large TV panels. Hon Hai (Foxconn) is the largest systems integrator and subcontract manufacturer in the world, as well as a key component supplier for many other brands. Furthermore, Hon Hai’s scope has expanded from being an original equipment manufacturer (OEM) to creating its own brands, like InFocus, and offering component manufacturing and smart system integration for smart homes, robotics, the internet of things (IoT) and smart cars.

Hon Hai’s overarching strategy in acquiring Sharp is to strengthen its corporate position in several ways, as outlined below.

Smartphone, TV and automotive display capacity and technology

Hon Hai has been shaping its display business for years. Innolux, one of the largest thin film transistor (TFT) LCD manufacturers, also belongs to the Hon Hai group. Currently, the company owns half of Sharp’s Gen 10 TFT LCD, which is dedicated to large-size LCD TV panel production. If Hon Hai is able to gain control of Sharp’s Gen 10, it will have well-armed capacity for LCD TV, notebook, tablet PC, monitor and automotive displays. This vertical integration would allow Hon Hai to win key projects from customers like Apple, Sony, Vizio, Xiaomi and Huawei.

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Hon Hai currently has three Gen 6 LTPS TFT LCD fabs under construction in Kaohsiung, Taiwan, and Guizhou and Zhengzhou, China. These investments total over US$10 billion and may also extend to OLED. However, Hon Hai needs to acquire more advanced technology and engineering resources to support its ramp up. With Sharp as the leading LTPS and oxide maker, a takeover would provide Hon Hai with the advanced display technology it needs for these three fabs.

According to IHS, Sharp controls 22% of global LTPS and oxide LCD display shipment revenue for smartphones, which would strengthen Hon Hai’s stance considerably in mobile phone displays. Through its GIS subsidiary, which is a leading touch panel supplier and systems integrator for mobile products, the Hon Hai group has been aggressively expanding into touch panel technology and assembly integration. Sharp also owns many leading touch panel technologies and capabilities, so the business synergy in this area would be strong.

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Systems integration manufacturing business

Sharp’s position in LCD TV, home appliances (especially in Japan), solar energy, business solutions, LED and electronic components would also provide Hon Hai with the know-how, capability and technology needed to strengthen its systems integration and manufacturing business lines. Sharp’s LCD panel capacity and capability coupled with its successful history in electronic components and devices are important to Hon Hai. These would aid the company’s vertical integration efforts. Compared to Pegatron, TPV, Qisda and other electronics manufacturing service (EMS) competitors, Hon Hai would be able to offer complete solutions, including key components.

Intellectual property position

As one of the oldest electronics enterprises in Japan, Sharp possess a wide range of patents. Some of the patents are critical to the industry, such as multi-domain vertical alignment (MVA) wide view angle technology and many oxide (IGZO) processes. The patents are not only display related, but also include technology used in consumer electronics, solar, industrial engineering, light-emitting diode (LED), semiconductor and medical solutions. With Hon Hai’s long-standing emphasis on intellectual property, we believe that Sharp’s patents would fortify Hon Hai’s position.                                                      

Sharp’s brand

Hon Hai has clearly defined its strategy for systems integration and EMS without the possession or license of brands. However, Hon Hai has to rely on these capabilities and its superior supply chain management to win orders from leading global brands. The LCD TV is the most important consumer electronics device for Sharp. According to the IHS TV Display Supply Chain Tracker, Sharp has a target of 6 million LCD TV shipments worldwide. Sharp also licenses its brand to Hisense and Best Buy in North America and UMC in Europe.

Sharp’s branded products also include smartphones, notebooks, medical devices, tablets, interactive white boards, public displays, digital multi-functional printers, desktop monitors, air cleaners and solar systems, all of which interest Hon Hai. A takeover of Sharp would mean more cooperation between Sharp’s branded business and Hon Hai’s EMS manufacturing. One possible scenario would be for Hon Hai to focus on manufacturing and supply chain management while Sharp focuses on panel manufacturing and brand marketing.

Sharp has been recognized as a legacy and prestigious electronics company in Japan, and a takeover by Hon Hai would change many things, including Sharp’s culture. Hon Hai is well known for its managerial adjustments and fast response to end-market demand, which are very different from Sharp. Hon Hai’s restructuring of Sharp would be a difficult and time-consuming undertaking. However, the advantages gained in technology and consumer electronics, systems integration and displays could benefit and strengthen the joined company.

David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 5 April 2016

The boards of Foxconn and Sharp approved a takeover plan valued at US$3.5 billion at the end of March. This means Foxconn will control Sharp from now on. Through its subsidiaries Innolux and Century, Foxconn is a leading supplier of thin film transistor liquid crystal displays (TFT LCDs). Foxconn is already the largest component supplier, systems integrator and subcontract manufacturer for many of the world’s leading brands. The convergence of Foxconn’s business with Sharp’s TFT LCD business and other innovative developments, such as active-matrix organic light-emitting diode (AMOLED) and larger TV displays, creates a powerhouse with the largest TFT LCD production capacity and research capabilities in the world. We believe Foxconn Group’s takeover deal means it will acquire all of Sharp’s TFT LCD business. This allows Foxconn to strategically consolidate all the existing display operations and future research development with an aim to compete with other display makers from South Korea, Taiwan and China, as they all race towards capturing a larger share in other lucrative segments such as smart homes, robotics, Internet of Things (IoT) and smart cars.

Foxconn’s Innolux subsidiary is already in the process of increasing its production capacity with the building of its Gen 8.6 TFT LCD fab in Taiwan. In addition, Foxconn is building three Gen 6 low temperature poly-silicon (LTPS) TFT LCD fabs in Taiwan and China, which are targeting the high-end high-resolution and low-power consumption smartphone displays. These fabs are expected to be completed and operational within the next two years. With the acquisition of Sharp, which is currently the leading LCD maker—particularly in high-resolution LTPS TFT LCD smartphone displays, low-power oxide TFT LCD tablet PC displays and a-Si–based TFT LCD automotive displays—Foxconn is eager to make a considerable investment in building an AMOLED fab for flexible smartphone displays.

In terms of TFT LCD production capacity, the new company will account for 21% of total global capacity in 2016, surpassing LG Display, Samsung Display and BOE, according to IHS analysis (see graph below). 

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And the new company will retain its leading position in terms of production capacity for the next couple of years, in spite of aggressive capacity expansion plans from many Chinese LCD suppliers. The takeover deal comes at a time when the TFT LCD industry is locked in fierce competition, with Korean and Chinese companies increasing capacity with the display demand replacement cycle is slowing down. Display makers have also started to diversify to high-end display products that use either LTPS or oxide for high resolution, as well as to a product mix that is based on demand in various segments, such as PCs and TVs, and emerging applications for automotive and digital signage. IHS believes the Foxconn-Sharp takeover deal gives the new company a strategic advantage—not just in terms of production capacity, but also the broad diversification of display products that can be sold into existing and emerging segments.

The most immediate challenge for the new company is how fast and how smoothly it can merge operations, company culture and business models. However, given that the new company will be selling into the same key existing customers such as Apple, Sony, Samsung Electronics, LG Electronics and Lenovo, the consolidation of its operations may well be easier and faster to implement. But it's always a big challenge for any merger and acquisition to form a new operational organization, not to mention in this case, where it is a cross-culture, cross-border and cross-business model.   

On the other hand, what are the implications for Apple, who is the most important customer for Foxconn in terms of the OEM/ODM business? Will this give Apple concerns in terms of its supply chain/sourcing strategy as it adds more reliance on Foxconn? As we know, Apple is considering AMOLED as an option for the display of its future iPhone, and Foxconn and Sharp have declared that the new merger will inject JPY 200 billion (US$1.7 billion) to establish the AMOLED production line. Does the Foxconn/Sharp merger encourage Apple to move on AMOLED development promptly?  

Apple might be considering shifting the current iPhone display from LTPS TFT LCD to OLED (organic light-emitting display) and even flexible OLED for the iPhone 7 or iPhone 8. The reason for this might be the picture/photo performance (on OLED’s high color gamut) and flexible form factor. More information on the benefits of OLED is presented in the IHS Small Medium Display Supply Chain Tracker.

Of course, this model may not satisfy Foxconn's ambition when the company is looking forward to growing its business. We believe Foxconn intends to control more panel sources to strengthen its business with Apple in two aspects. First, to maintain its dominant position as a partner for Apple in which, compared to other ODMs/OEMs like Pegatron or Wistron, Foxconn has "displays" in its portfolio. And second, to start to include displays in its quote to Apple whereby Foxconn can attempt to increase its revenues rather than simply making money on assembly services. We believe Foxconn’s position as a supplier to Apple would not be easy to replace given Foxconn's strength in supply chain management, assembly yield and technology integration, and its great economic scale. Apple certainly recognizes these benefits for its products.

For Apple, Sharp is a key display supplier but Sharp is struggling with its financials. While Sharp’s technology (LTPS TFT LCD and oxide TFT LCD) are praised by Apple, it is a positive development for Apple to see Foxconn to acquire Sharp and provide financial support for Sharp to expand with new display capacity and technology.

One critical element that Apple always requires is that its suppliers dedicate display capacity to Apple. This means that panel suppliers must build a special “Apple” production line once they decide to do business with Apple. Out of the current possible OLED suppliers on the table—Samsung Display, LG Display, JDI and Sharp—Sharp is the only one that has lacked the money to keep investing in dedicated production lines. Therefore, Foxconn’s injection of money is vital for Sharp if it wants to compete for Apple's business if it shifts to OLED. Meanwhile, Foxconn's takeover of Sharp might encourage Apple to transition to OLED faster given that the reliable supply pool will expand.

David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 6 April 2016

We have investigated network functions virtualization (NFV) and its software-defined networking (SDN) companion for the past five years as they have become the hottest topics in telecom. Service provider networks are complex: they have seven layers, feature multiple network domain types including consumer broadband, business VPNs, mobile and mobile backhaul—to name a few, and carry multiple services such as broadband, layer 2 VPNs, layer 3 VPNs, and optical transport. Providers believe that NFV and SDN are a fundamental change in telecom network architecture that will deliver benefits in new service agility and revenue, operational efficiencies, and capex savings.

Academic beginnings, early successes in carrier environments

From its academic beginnings at Stanford University in 2005 to practical applications in data centers and telecommunications carrier networks during the past four years, SDN has shown the potential to solve significant operational problems. The early successes by Google in data centers and by NTT in the carrier environment have inspired service providers around the world to invest time and effort into laboratory proof of concept (PoC) projects for specific SDN target network domains and use cases using the inter-related “partner” NFV.

And carriers everywhere are moving toward NFV, as illustrated by our 2015 survey of worldwide service providers that control over 43% of global telecom capex and 39% of revenue. One of our key findings was that all major operators are either now deploying NFV or plan to within the next few years. Our research in this and other studies indicates that two primary factors are driving service providers to SDN and NFV: service agility that results in quicker time to revenue and operational efficiency.

For the most part, carriers are starting small with their NFV and SDN deployments and focusing on only parts of their network, on limited services, or with a limited number customers, which we call “contained domains,” to ensure they can get the technology to work as intended. And though momentum is strong, it will still be many years before bigger parts or a whole network is controlled by SDNs.

Top four NFV use cases and deployment timing

The network industry is very interested in how NFV will be deployed, the use cases, and where in the network operators will make their initial investments. A majority of operators are clear about where they intend to deploy NFV and how these solutions will be used.

Some of the earliest NFV deployments in the 2015–2016 timeframe are for business virtual enterprise customer premises equipment (vE-CPE), also known as “vBranch.” The business vE-CPE use case stood out as the strongest among all others in the survey, with 64% of our carriers planning to deploy in this immediate timeframe. Carriers view vE-CPE as the top use case for revenue generation, gaining operational efficiency, and reducing capex.

Service chaining is a horizontal use case where virtual network functions (VNFs) are combined in different sequences to deliver customer-specific services. We expect that eventually nearly every NFV deployment will involve service chaining.

The European Telecommunications Standards Institute (ETSI) defined nine use cases for NFV, including several that are used to offer services to enterprises. The chart below, which is sorted by popularity and time, shows the top four use cases for early deployment in 2015–2016 as identified by carriers participating in our study. These remain the top use cases for 2017 and later.

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© 2015 IHS, NFV Strategies Global Service Provider Survey, May 2015

1 – Business virtual enterprise CPE (vE-CPE)

Virtual enterprise CPE (vE-CPE) is where network functions such as firewalls, wide area network (WAN) optimization control, and intrusion detection systems that are today typically deployed in boxes at each customer premises are offered as VNFs executing on commercial servers. Service chaining can optionally be used, and virtual provider edge (vPE) router software could be used.

2 – Service chaining

Service chaining is a technique to execute a selected set of services that a customer has signed up for. For example, a customer may choose among a set of virtual firewall (vFW), virtual intrusion prevention system (vIPS), and virtual WAN optimization controller (vWOC) options for say, vFW2, vIPS3, vWOC1. These services can be executed on the customer’s traffic via service chaining. Some vendors use vPE software in their service chaining products.

3 – Virtual network platform as a service (vNPaaS)

Virtual network platform as a service (vNPaaS) is in essence a logical slice of a physical and virtual network that looks and acts like a private physical network to the application (for example, Internet of Things) or customer. Specifically, it provides a toolkit for conveniently developing, deploying, and administering application software that is structured to support large numbers of subscribers, process large quantities of data, and potentially be accessed via the internet. In this case, the service provider provides a toolkit of networking and computing infrastructure as well as potentially some VNFs as a platform for the creation of a virtual network—that is, a vNPaaS. Enterprise consumers of this service use that toolkit to develop their own virtual networks.

4 – Virtual provider edge router (vPE)

The virtual provider edge router (vPE) sits at the point of the “IP edge,” which is the point in an operator network where IP VPNs, content delivery networks (CDNs), and other IP services are delivered via the access network to customers.

Bottom line

We are in the early stages of a long-term transition to SDN-NFV architected networks. A lot continues to be learned as each year passes, and various barriers and drivers have become more prominent as operators get closer to commercial deployment.

Market research is very useful to determine current buyer thinking, and some of the top NFV use cases have changed positions in the last couple of years and may settle in for fewer changes in positions by 2016.

Carriers will learn that some avenues are not as fruitful as expected, and telecom equipment manufacturers and software suppliers may well invent new approaches that open up new applications. We are, of course, conducting an NFV survey again this year, and it will be interesting to see what new issues emerge and which problems get resolved in the additional commercial deployments planned for 2016.

If you’re interested in hearing more about the experiences, lessons, and discoveries from service provider deployments of vE-CPE and vCPE, be sure to watch the replay of our recent webinar on Carrier NFV and SDN Lessons from Virtual CPE Deployments.

Michael Howard is a Senior Research Director and Advisor for Carrier Networks at IHS
Posted on 12 April 2016

Cord-cutting is now a reality in most countries in Europe. Many European operators have lost TV subscribers in the last year and there are increasing numbers of homes that are not taking or not planning to take a pay-TV subscription package, the “cord-nevers.” In the US, for example, where the total number of pay TV subscribers has been around 100 million for the last four years, pay-TV penetration has been declining due to the addition of new TV homes not taking traditional pay-TV packages.

The way people consume TV is changing dramatically. The new generation of viewers born in the digital area—millennials and digital natives—are used to watching whatever they want whenever they want, on any device they have (but mainly laptops and tablets). This on-demand world is particularly strong for movies and series. This is where over-the-top (OTT) providers like Netflix have done their job so well.

There are two main strategies that operators can follow to attract the cord-nevers and avoid the cord-cutters: launch their own OTT service or join forces with Netflix and other OTT providers.

The report from IHS Technology entitled “Netflix on Pay TV: A Marriage of Convenience,” was compiled from interviews with executives from companies across the pay-TV value chain, including operators and their technology partners. The data underlying the analysis is sourced from company reports and from IHS market intelligence and forecasts.

Conclusions from the report:

• Integrating Netflix into traditional pay-TV services, such as Virgin Media and BT TV, has had a net positive impact on these operators’ performance
• These partnerships are not appropriate for all, though—operators that are investing in their own movies and entertainment content, such as Sky, typically remain wary of working with Netflix
• In the longer-term, there is a risk that Netflix will put pressure on some operators’ core services, including premium movie packages and video-on-demand (VoD) offerings

Netflix has partnerships in place with 25 pay TV providers, with many more likely to follow after the OTT video giant expanded to 130 new territories last month.

Revenue-wise, however, operators typically receive a share of the ongoing subscription fees only for customers that sign up via their set-top box. This is insignificant, as most Netflix users either already have an account or sign up via a more user-friendly device, such as a PC/laptop or tablet.

The results from the IHS survey generally support the view that third-party video-steaming services positively impact operators’ performance and complement traditional channels and VoD offerings. However, caution remains regarding how this dynamic could change as Netflix becomes more popular, with some operators wary that it has the potential to negatively impact core pay-TV services and, in turn, average revenue per user and overall revenue.

Growing Netflix usage could also prompt pay-TV customers that are either subscribing to or considering premium movie services to reconsider their need for these higher-cost packages.

According to IHS estimates, Showtime, The Movie Channel, Flix and Encore all experienced US subscriber declines in 2014. HBO was among those to achieve positive net additions—along with sister channel Cinemax and rival Starz—largely thanks to the launch of its direct-to-consumer streaming offering, HBO Now. In spite of the tough conditions, IHS still forecasts subscriber and revenue growth for most of the major players in the years to come.

Maria Rua Aguete is the Research Director for Television Media at IHS
Posted on 13 April 2016

Samsung, the world’s leading TV brand, slashed panel demand in Q4’15 because the company’s panel purchases and set shipments were mismatched. It shipped 47.5 million sets while it purchased 54.6 million panels in 2015.

In Q1’16, Samsung remained cautious about purchasing panels. However, Samsung is becoming increasingly worried about the recent unexpected supply issues at Innolux and Samsung Display due to the Taiwan earthquake and the low production yields for new models.

Samsung has been pressured to deliver its new 2016 models to channels by April. It has negotiated with its captive panel supplier to start shipping panels by air to minimize the impact of the panel supply constraint at Samsung Display and shortened lead time. Samsung was rather conservative and cautious about refilling panels due to weak market demand and inventory concerns, but the company is planning to pull in and purchase more panels in the second quarter to avoid the risk of a supply constraint. The following chart shows an update of Samsung’s panel purchases and set shipment by quarter and that the company will purchase more panels in the second quarter of this year. 

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According to the IHS TV Display Supply Chain Tracker, Samsung plans to resume its original level of TV panel purchases from Samsung Display. It will purchase 4.6 million panels in the second quarter, up from about 3.9 million in the first quarter. Samsung also plans to buy more panels from external panel suppliers BOE, Innolux, and AUO.

It is clear that Samsung will purchase more from its captive panel supplier because companies have agreed to ship panels by air. Lower panel purchasing from its captive panel supplier in the first quarter was mainly because Samsung Display suffered a low production yield for new models and failed to commit supply volumes to Samsung. Samsung Display’s panel supply issues cannot be resolved in the short term and will likely continue in the second quarter and even extend into the third quarter. This has created some anxiety in the industry. In addition, Samsung’s procurement strategy is to diversify its panel supply portfolio and business strategy to cautiously drive more 40” shipments. As expected, Samsung has adjusted its purchasing attitude and allocation plan for each panel maker for Q2’16.

On the other hand, we see Chinese TV makers also changing their display panel purchase attitudes. According to the IHS TV Display Supply Chain Tracker – China, early in Q1’16, China’s top TV makers—Hisense, TCL, Skyworth, Konka, Changhong, and Haier—were more cautious about panel purchases, expecting to significantly reduce panel purchasing. However, many of them are aware of the sudden changes in panel supply/demand sentiment and have flown to Korea in recent weeks to check their panel allocations from Korean panel makers.

Currently, China's top six TV makers are approaching panel makers to negotiate panel allocations for Q2’16, which are forecast to increase 8% quarter-over-quarter and 17% year-over-year. It is understandable that some of the purchasing forecast might be overbooked because TV makers are worried supply may be constrained. Chinese TV makers may further adjust their panel purchasing forecasts for the second quarter if Samsung’s panel purchasing attitude changes drastically. 

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The aggressive panel inventory refill of Samsung TV and Chinese TV makers has caused LCD TV panel prices, which have been falling for nine months, to stabilize and rebound since April. As we indicated in the Large Area Display Price Tracker, LCD TV panel prices—especially for 32”, 40”, and 43” sizes—have rebounded in April, and 49”, 50”, 55”, and even 65” prices have stopped falling.

It is arguable whether panel price hikes are sustainable. The industry is paying attention to the behavior of some leading TV makers, in particular Samsung’s purchasing attitude and strategy, as well as the buying plans of China’s major TV makers, which are subject to change based on supply chain dynamics and their actual TV shipment performance.

TV makers plan to refill more panels from their panel vendors in the second quarter, but TV set pipeline inventories in May and June and the competitive landscape are critical to determining whether any adjustment to panel purchasing is necessary.

The supply chain dynamics and the demand outlook forecast may result in different supply/demand scenarios and TV panel pricing trends. The panel price hike in Q2’16 is due to supply-side issues rather than a demand push from the market. It is arguable whether these panel price increases are sustainable in the third quarter and thereafter because the excess supply of TV panels in 2016 will continue to worry LCD TV participants.

Supply-side control, industry discipline, and commitment to drive replacement with larger sizes are important to achieving a balanced supply and demand. Rapidly growing competition in China has been the biggest concern to industry peers, but how long panel makers can withstand financial losses is an important consideration.

Panel price hikes may be short lived and the risk of panel price corrections cannot be overlooked if the panel industry becomes too excited about the current supply/demand balance reversing to tightness. In order to sustain stable prices while they are above the cost line, panel makers will need to shift to larger ultra-high-definition (UHD) panels and carefully manage their supply relationships with customers as well as their inventories.

David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 19 April 2016

Over the past two decades the average life cycles for integrated circuit (IC) components have decreased by about 30% on average. But that doesn’t mean that there won’t be opportunities to select ICs that will be available from Original Component Manufacturers (OCMs) well into the future. It does connote, however, that design and component engineers need to ensure they select parts that have the very best chance of still being obtainable for the foreseeable future. In turn this will help companies safeguard that successful product offerings can be produced without expensive redesign cycles throughout the life of their products.

When reviewing trends of IC components introduced every year since 1998, some interesting trends emerge. For example, 50% of components introduced in 2002 are still being actively produced by OCMs; of the parts discontinued, the average life cycle before discontinuance was just short of six years. When compared to a decade later, in 2012, 50% of components introduced that year have already been discontinued today. Yet OCMs waited just over two years on average to discontinue the ICs that were not well adopted by the market and did not meet OCM sales performance requirements, indicating that the market had become less tolerant of ICs that didn’t deliver viable sales.

Another interesting trend is the sharp decrease in life cycles for components introduced in 2008. Only 21% of parts introduced in 2008 by OCMs remain available in the market. Undoubtedly the global economic crash toward the end of 2008 is a contributor to the reduced life cycles for ICs introduced in 2008 as OCMs scaled back product offerings in reaction to the downturn. 

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So how can companies that produce longer-life-cycle products protect themselves from supply chain disruption? For firms that do not have the luxury of working directly with OCMs to design custom ICs, parts selection on the open market is difficult but critical to reducing redesign costs or manufacturing delays down the road. A few recommendations include:

• Select ICs that have been well adopted by the market, available for several years from many authorized distributors.
• Ensure that the OCM has a favorable product-longevity policy.
• Select parts that have drop-in cross references as to form, fit and function (FFF) from several different OCMs. This will confirm that other opportunities exist if supply chain constraints emerge.
• Utilize an end-of-life notification service to allow proactive last-time buys and avoid costly unexpected supply chain constraints and production line-down delays.
• Understand commodity and OCM forecasts in the years ahead so that part buys from expected OCM commodity leaders can be facilitated.
• Finally, make sure that your organization has access to the best obsolescence management and component forecasting tools in the industry. Visit:

https://www.ihs.com/products/board-level-electronic-component-management.html

https://technology.ihs.com/Categories/450489/semiconductor-components

Greg Wood is a Director in the Electronic Parts business at IHS 
Special Thanks to Praveen Hiraskar for his contribution
Posted on 20 April 2016

On the demand side, communication infrastructure, including 3G, 4G/LTE, and high-speed wireless services, continue to expand worldwide. These system improvements have led to demand for smartphone displays with higher specifications, including lower power consumption, higher resolution, and larger sizes. Shipments of low-temperature polycrystalline silicon (LTPS)–based displays such as LTPS thin film transistor liquid crystal display (TFT LCD) and LTPS active-matrix organic light-emitting diode (AMOLED) continue to increase due to the high performance features offered by LTPS.

On the supply side, Samsung Display—so far the dominant AMOLED display supplier—continues to improve the cost structure through economic scale and process know-how improvements, including in LTPS backplane, touch panel integration, light-emitting layer performance, encapsulation technology, the evaporation process. According to the IHS Smartphone & Tablet Display Cost Model, Samsung Display’s AMOLED panel cost can be very similar to and competitive with LTPS TFT LCD at the same size and resolution. Furthermore, curved and flexible technologies are improving with better yield rates.

On the brand side, Samsung rarely shipped AMOLED to Chinese brands before 2015, when this policy changed. Many Chinese smartphone brands have started adopting AMOLED displays in their new product lineups to differentiate them from the TFT LCD models marketed in 2015. As a result, demand for high-end AMOLED smartphones has increased remarkably, not only for Samsung’s Galaxy series, but also for several Chinese smartphone brands.

In 2014, there were only 21 smartphone models with AMOLED screens, and they were only high-definition (HD) or full HD (FHD) resolution. AMOLED displays were seen as high end and almost synonymous with the Samsung Galaxy name. In 2015, Samsung changed its policy and started selling OLED displays to other brands. More than 50 smartphone models worldwide had OLED screens in 2015 that came from many non-Samsung brands including OPPO, Vivo, Gionee, Micromax, Meizu, WIKO, Huawei, Microsoft, Google, and Blackberry. Most important, the size of AMOLED displays has increased from 4-5.x-inch to 6.x-inch, and resolution has improved from HD/FHD to wide quad HD (WQHD). Form factors include both rigid and flexible OLED displays.

Among global brands, Chinese smartphone makers are the most eager to adopt AMOLED displays. In the fourth quarter of 2015, Samsung Display shipped 30% of its AMOLED smartphone displays to external customers such as OPPO, Vivo, Gionee, Meizu, and Huawei. Samsung also started to release premium WQHD curved AMOLED displays to Chinese brands to win more rigid AMOLED display orders in China.

AMOLED panel shipments were up 48% year-over-year to 257 million in 2015, of which 30 million were flexible, according to the IHS OLED Display Market Tracker. In 2015, AMOLED accounted for 17% of the total smartphone market on a unit basis and 13% of the total mobile phone market (smartphones and feature phones).

OLED’s success has also influenced the most iconic smartphone, Apple’s iPhone. Apple is considering OLED for the next iPhone display. News in Korea indicates that Apple will adopt AMOLED displays in late 2017, and the main supplier will be Samsung Display. Samsung Display is building an OLED fab with a huge capacity specifically for the iPhone. LG Display is also building an OLED fab for Apple, and JDI and Sharp in Japan may move their AMOLED display development into mass production of both rigid and flexible AMOLED displays.

However, Samsung Display is currently one of the only makers supplying AMOLED displays for smartphones. Other display suppliers like LG Display, AUO, EverDisplay, and Visionox do not have a large volume of production for AMOLED smartphone displays. In fact, these makers are all struggling with the yield rate and reliability of their smartphone AMOLED displays.

The supply of AMOLED displays is a growing concern. The key to producing an AMOLED display is not only the controllability of the equipment, but also process know-how. Each display maker develops its own specific know-how because many details in the AMOLED process are not standardized, unlike with TFT LCDs. This hampers newcomers from rapidly ramping up AMOLED panel capacity. With Apple possibly jumping into the OLED mix and new display suppliers still needing time to ramp up capacity, OLED panel supply might be very tight in the next few years.

Chinese smartphone brands will be key in driving OLED panel demand. Chinese brands are adopting AMOLED displays for several reasons: better color performance, a thinner and lighter form factor, touch panel integration, and flexible options. Most important, OLED offers Chinese brands a way to differentiate their products from TFT LCDs.

In 2015, OLED accounted for 10% of the shipments by the 10 leading Chinese smartphone makers—Huawei, Xiaomi, ZTE, OPPO, Vivo, TCL, Lenovo, Coolpad, Meizu, and Gionee. In 2016, OLED will account for 15% of Chinese smartphone brands’ shipments. Chinese smartphone brands purchased approximately 50 million OLED smartphone displays in 2015. This is expected to grow to more than 85 million in 2016.

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OPPO is the most aggressive OLED user in China, seeing the OLED display as a key differentiator for its smartphones. However, growing competition for and constraints on the OLED panel supply will limit OPPO’s AMOLED expansion. OPPO’s AMOLED penetration will grow from 37% in 2015 to 39% in 2016. Vivo also has a plan for AMOLED displays. In 2015, 25% of Vivo’s handsets came with an OLED display. According to its plan, this will jump to 35% in 2016. Meizu will increase slightly from 18% in 2015 to 19% in 2016. Huawei’s AMOLED display penetration will jump from 2% to 8%. Coolpad and Gionee are reducing OLED display penetration. Of these 10 suppliers, Xiaomi and TCL are the only two not taking any OLED in 2015, but Xiaomi may boost its share of AMOLED display if it finally make a good deal with its display supply chain.

David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 21 April 2016

The impact of Artificial Intelligence (AI) on the world must surely be one of the greatest contemporary puzzles. The spectrum of risk and the gamut of possible applications are significantly complex that almost any scenario can be envisioned, from robot apocalypse to workless utopia. The only assurance is that change is coming, and in my opinion, it is likely to be a revolution of a scale seen only during the onset of history-shifting events such as industrialization or farming.

The timing is auspicious: Google AI unit DeepMind’s AlphaGo has recently beaten South Korean professional game player Lee Sedol at the ancient Japanese board game Go—a game of huge potential complexity based on simple rules and considered one of the biggest challenges in AI, since it defies brute-force planning. As a milestone in machine intelligence (and good PR), it sits up there with IBM Watson’s victory on Jeopardy in 2011 and IBM’s earlier AI DeepBlue’s victory over chess grandmaster Garry Kasparov in 1997.

What AlphaGo does is worth briefly exploring, since it relies on the same core principles as all machine learning and resulting AI. The system is structured as a deep neural network, mirroring the connections made as humans learn. This system is then fed with huge quantities of data until the machine can identify patterns, allowing for complex feats like facial recognition and semantic natural language processing. It’s this structure that allows the same capabilities in Facebook, Google, and the NSA.

However, for DeepMind this kind of learning is limited in part by what the human programmers tell the machine it is looking at. In other words, if you tell the AI it’s looking at a dog, it will learn that it’s looking at a dog after multiple repetitions of the training. It will learn, but it still needs to be taught that it’s looking at a dog until it learns it is, indeed, looking at a dog; for these feats humans are the teachers.

Where DeepMind took things a step further is that it allowed AlphaGo to learn from itself by experimenting and playing against variants of its own intelligence. This not only reinforced the learning from human input, but also allowed AlphaGo to discover its own unique ideas—what might appear as creativity. In the case of Go the success in creativity can be clearly shown— games are won or lost on brilliant, out-of-the-box moves. As seemed to be proven in Game 2 and Game 4 of the AlphaGo-Lee showdown, two games pivoted on moments described in various superlatives (e.g., “one in a million”) by those in the know. Most interestingly, while one of these superhuman leaps of creativity was from Lee, the other was from AlphaGo.

If repetition creates learning, and creativity can be extracted from experimental self-learning—a process that might be similar to thought or reflection—then AI can surely provide creativity. AlphaGo showcases a specific, and relatively narrow (although very impressive) use of AI, but the ability to ape human thought will be more far-reaching than we realize, and is already starting to happen. Journalism is going through a related process of steady automation as AI, such as Narrative Science’s Quill, learns to write informative text, and also increasingly understands how to stylize and build a wider narrative. A similar creative leap has been made by the European What-If Machine, which has penned London’s West End musical “Beyond the Fence.”

A review of work likely to be lost to automation places roles in telemarketing, legal aides, accounting, auditing, and news writing all set to be replaced heavily by automated systems in the coming years. Factory work has already been supplanted in large part by assembly-line robotics, but more complex pattern-oriented tasks including those done by warehouse workers and delivery drivers are also under threat from developments, such as Amazon delivery drones and automated warehouse machines tendered by the likes of Kiva Systems. Even highly cerebral jobs, such as medical diagnostics, are being offered by IBM Watson, and driverless cars and planes are hot on the heels.

AI will allow a degree of automation and robotization of the world that will make many things unimaginably different and likely spark a wave of societal and economic reform not seen for generations. And we’ll look back at seminal moments like AlphaGo, DeepBlue, and Watson as just the beginning.

At what point can you be sure this article wasn’t written by a machine?

Tom Morrod is the Senior Director for Consumer Electronics, Broadband and Video Technology at IHS
Posted on 21 April 2016

IHS estimates that Indian TV broadcasting revenue, including advertising, subscription and public funding, totaled
$4 billion in 2015. Revenue is forecast to grow 17% in the next five years, stimulated by increases in TV advertising and growth in pay TV. Of this revenue, TV networks spent an average 62% on TV programming, putting India in the league of countries like Australia and Italy. TV programing spend in India is expected to almost double in five years and reach $5 billion by 2020, driven by improved audience measurement, increased demand for TV content especially from rural areas, sports programming investments and the launch of over-the-top (OTT) platforms by all the major broadcasters.

A more reliable TV audience measurement by the newly appointed Broadcast Audience Research Council (BARC) has revealed unprecedented potential in rural viewership and regional markets. This is coupled with the nationwide cable TV digitization program scheduled to complete in December 2016 which is likely to boost TV content consumption. TV programming will be created to tap into these opportunities.

Sports continue to be popular content for TV viewership. Despite the rising cost of broadcasting rights, ambitious foreign-owned broadcasters will continue to invest in sports programming. Star India (owned by 21st Century Fox) reportedly set aside $2 billion for sports programming from 2014–2019. Sony Pictures has teamed up with ESPN to offer sports content. All major broadcasters including Star India, Sony Pictures, Zee Entertainment and Viacom18 launched OTT platforms, making content investment more feasible than before. In the wake of Netflix’s success, broadcasters are expected to allocate more budget to original programming, curating a library exclusive to their own TV and OTT platforms while countering ever-increasing licensing costs.

In view of these market developments, it’s no wonder that 21st Century Fox is betting big on its Star India business, attributing it as a key growth driver moving forward. Also active in the market are US TV groups Walt Disney and Discovery Communications. China-based LeEco has also unveiled plans to build a substantial content library in India. Moving forward, IHS anticipates that investment in the Indian TV market will continue to thrive with interest from other foreign TV networks while local companies strengthen their content capabilities in order to stay competitive.

For more information, please visit:
https://technology.ihs.com/576845/rising-in-the-east-indian-tv-programming-spend-tops-25-billion

Vinita Jakhanwal is a Senior Director for IHS
Posted on 25 April 2016

As we learned in February, Chinese New Year 2016 is a year of the Monkey and for people born in a year of the monkey (1920, 1932, 1944, 1956, 1968, 1980, 1992, 2004), 2016 is considered a bad year. Well, there might not be any connections but telecom spending in China looks bad this year.

For those of you who subscribe to our Mobile Infrastructure Intelligence Service, you already know the story: China fueled the LTE (Long Term Evolution) market last year, which in turn reached its peak and consequently, the outlook looks bleak this year with double-digit year-over-year decline! However, if it’s any consolation, LTE spending is not looking too bad and may actually be one of the few bright spots after all.

China’s telecom spending will sink 18% this year

In late March, China’s Big 3 reported their full 2015 financial results and provided their 2016 capital outlay guidance (see Exhibit 1). China Unicom will cut the most with -44%, followed by China Telecom (-11%), and China Mobile the least with -4.8%. It’s worth mentioning that last year’s implementation of tower sharing handled by a joint venture company named China Tower has already delivered significant operational and capital expenditure savings for the three service providers. China Mobile owns 38% of China Tower, China Unicom 28% and China Telecom 28%. The final 6% is held by China Reform Holding Company (CRHC), an entity controlled by the government's State-owned Assets Supervision and Administration Commission (SASAC).

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As usual, the devil is in the details:

• China Unicom is committed to reduce capex through strategic cooperation with rival China Telecom (agreement signed in January 2016) and expects to save RMB59.9B year-over-year, which leads to the 44% cut. Starting this year, the two companies will co-build and share mobile and transmission networks for remote areas and indoor venues. The two operators have pledged to work together to accelerate shared infrastructure deployment in a bid to improve mobile coverage and performance more rapidly. They will also work together to restore one another's services should they suffer outages caused by natural disasters and major emergencies. For China Unicom, the plan is to achieve a RMB20.6B (75%) reduction in 2G/3G spending, reinforcing the acceleration of the migration to the shiny LTE network. Fixed-line broadband and data spending will be cut by a half and infrastructure, transmission and others will see a 46% reduction.

For LTE alone, the company completed the coverage phase of its network build through the addition of 310k eNBs (eNodeBs), bringing its footprint to 400k. China Unicom plans to add another 280k eNBs this year to boost coverage (perception of 97%) and quality.

• China Telecom will be focusing on improving LTE coverage in towns, villages, and rural areas and will also beef up its LTE footprint in all cities. The company did not provide many details but also said they’ll bring fiber to all cities.

The company added 330k eNBs last year, which is 50k above the initial plan set one year ago, bringing its LTE footprint to 510k eNBs. China Telecom plans to add another 290k this year to reach the 800k eNBs bar.

• China Mobile is focusing on gradually decreasing capex each year, a pattern that started in 2014. With a planned 18% reduction, transmission will take the largest hit this year to make room for increases in areas such as business networks, support systems, buildings, infrastructures, powers, and others. The company boosted transmission spending last year to grow its interprovincial backbone network capacity by 250% year-over-year. 

Regarding LTE, the company added 380k eNBs last year, bringing its footprint to 1.1 million and will add 300k eNBs this year.

Bottom line

China is no longer the new Eldorado! At this point, China looks very much like developed nations characterized by market saturation, lack of differentiation, stagnant if not declining blended ARPUs, declining voice and SMS revenues, and fierce competitive pressures. And this capex cut is not a onetime event: the three Chinese service providers made it clear that they will gradually reduce their capex each year moving forward. In fact, China Mobile started this trend last year with a 9% capex reduction over 2014 and now an almost 5% cut.

The strategic cooperation between China Unicom and China Telecom may be setting a direction toward a potential two-operator market in China. However, I believe there’s a very low probability that a merger will materialize because the carriers are state backed, and the move could conflict with the government’s current agenda.

Stéphane Téral is a Sr. research director, mobile infrastructure & carrier economics for IHS
Posted on 27 April 2016

IHS Technology recently shared a presentation with our customers that provided insights on the recent Kumamoto, Japan, earthquake—along with expectations on the impact of this disaster on the electronics supply chain. IHS extends its condolences to all those who lost loved ones, were injured, or suffered unimaginable devastation. Our analysis, to be sure, cannot begin to account for the sorrow and loss of the Japanese people in this region. However, as the electronics industry operates in a globally connected environment, major disasters have ripple effects that extend far beyond the local area that is directly impacted. It is vital, then, to understand and respond appropriately in these circumstances.

First, it is important to comprehend the main issue at play as to the earthquake and its impact.

• The earthquake caused operations to be suspended at key semiconductor production facilities located in Kyushu, and area also known as Silicon Island in Japan.
• The production plants that experienced damage include:
  • Renesas Electronics’ Kawashiri plant
  • Mitsubishi Electric’s Kumamoto plant
  • Sony Semiconductor’s Kumamoto plant
  • SUMCO's Kubara silicon wafer production facility

The figures below provide a visual perspective on the epicenter and size of the earthquake, and on the facilities that were damaged and taken out of production. Accounting for the time needed to wait for the ground to stop moving in order for proper inspections to be done and to assess the true extent of the damage, the next figure shows the timing and size of the 57 tremors and aftershocks in Kyushu associated with what in effect were two large earthquakes. (actually, on the same day there was a 6.2 and 6.0 magnitude earthquake. So it would be three major jolts if these are counted separately). There are been other earthquakes of lesser magnitude in various regions of Japan. However, 57 tremors of magnitude 4.0 or above have taken place in the immediate region on or near Kyushu. The good news from this figure is that it appears that things are stabilizing in the region, so workers can proceed to safely inspect the facilities.

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Figure 1 – Map of Kyushu, Japan, and of the earthquake’s impact

Kumamoto Earthquake: Three major jolts–stabilizing seven days later

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Figure 2 – Timeline of tremors associated with the earthquake in Kumamoto, Japan 

In the presentation delivered by IHS Technology, the status of each facility as well as of the products and markets impacted is presented. Also, the industry most affected—automotive production (Toyota, specifically)—is analyzed. Out of this analysis, the impact from the Kumamoto earthquake can be summarized below:

• The Kumamoto earthquake is not comparable in magnitude to the Great East Japan earthquake of 2011, which triggered a major tsunami and nuclear-plant radiation exposure
• Impact from this recent event on the electronics and semiconductor supply chain is limited to a handful of companies and production facilities, unlike the wider effect of devastation caused by the 2011 disaster
• There is no ongoing impact to critical infrastructure and utilities
• There are no damaged buildings
• The primary cause of delay before normalization can occur is the need for inspections—which, however, cannot take place until the earth stops moving

Figure 3 shows the relative levels of damage from an earthquake and the approximate timelines needed for recovery. In this case, IHS expects that full recovery will take place in four to six weeks from the time of the initial earthquakes.  

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Figure 3 – Supply chain impact and recovery

For this most recent major earthquake in Japan, the key issues to understand are:

• Lessons learned from the 2011 Great East Japan Earthquake resulted in the creation of new business continuity plans:
  • Likely benefits in recovery from this earthquake will be due to these plans
  • Return-to-normal operations are typically provided for within one month
  • Restructuring plans will be in place, to create redundant production
• Likely impact on the semiconductor supply chain:
  • Implementation and enhancements to “Business Continuity Plans” will result in only a temporary and transient impact
  • Possible near-term pricing volatility may occur, but nothing major is anticipated
  • Demand for semiconductor components is currently low. Companies have weak demand and minimal long-term visibility
  • Quick recovery is expected, with normal operations making up for lost production

Building on lessons learned from previous disasters, the key players in Japan are well prepared to recover quickly from this disaster and should be able to minimize the deleterious impact of the Kumamoto earthquake on the global electronics supply chain.

For those interested in the complete details of the IHS presentation, you can contact me directly via email at dale.ford@ihs.com.

Dale Ford is the Vice President of Thought Leadership for IHS Technology
Posted on 28 April 2016

In the past few years, drones have risen from being merely fun and novel consumer toys to earning more serious regard—as well as tangible deployment—in commercial applications. While almost 3 million drones were sold last year into a variety of uses, primarily consumer, by 2020 over 10 million of these unmanned devices will be shipped, with commercial applications starting to become their main purpose by then. But for the future of drones to successfully transition to a wider range of truly commercial uses, comprehensive regulatory changes need to occur. 

Current regulation related to the use of drones is patchy at best, and regulators are constantly playing catch-up with admittedly difficult questions and issues surrounding drone use and need. And in most countries there is no history of unmanned vehicles, so regulations have developed as a reaction to technological change rather than as a means to enable an industry need.

Guidelines also differ for consumer vs. commercial drones. Consumer drones, for the most part, sit broadly outside of regulations—or are treated as model airplanes—as long as stipulations are in place specifying their use within particular parameters, typically determined by a flight ceiling and by restrictions on flights over sensitive areas or locales close to people, vehicles, and buildings.

Commercial applications for drones, on the other hand, are generally only allowed by specific exemption that is granted by the aviation regulator for each country. This, however, has the unintended consequence of creating a bottleneck for foreseeable new commercial drone uses and needs. In fact, an open and valid question can be raised about whether the civic aviation regulators are truly in the best position to deal with the nuances and complexities of what are really very different uses for drones. In the United States over 5,000 exceptions have been granted for drone commercial applications with a backlog remaining in excess of 7,000. In France around 2,500 commercial approvals have been granted, with a further 2,000 in the United Kingdom. Regulations mooted have ranged from requiring a full pilot’s license to fly a drone commercially, down to blanket approvals for any commercial use for a nominal fee.

The types of concerns commonly raised for drone use are many and varied. For instance, drones intended to photograph houses for real estate sales may cause the most sensitivity to privacy, while drones used for construction may involve health and safety concerns. Meanwhile, drones employed for the delivery of goods or products entail security worries, whereas high-altitude environmental surveying might pose more of a civic aviation issue. So far, the Federal Aviation Authority (FAA) in the United States has approved commercial drones primarily for photography and video (weddings and events being the main use), inspection, and surveying. More specialist uses, such as for viewing real estate, search and rescue, and agriculture, are much less requested and used.

Countries are also struggling to develop an effective and fit-for-purpose method to handle the myriad requests coming in for commercial drone use. An interesting lesson may come from Japan, which is unusual in that the country has long-term regulations regarding drone use in agriculture for crop spraying. These licenses are administered by Japan's Agriculture Aviation Authority instead of the more general-purpose Civil Aviation Bureau, greatly streamlining the process. 

Above all, a substantial learning curve is involved before we see the commercial use of drones reaches full potential and before effective regulation can take hold in a complex environment. The benefits of drones could be far reaching, allowing for a wide range of menial tasks to be effectively automated—from security patrols to urban delivery, from environmental surveying to carrying materials on construction sites. But it will be complex to regulate effectively across all the different needs and uses possible for such devices, and the temptation for authorities may be to resort to very reactive behavior, or to stifle innovation.

True, the appropriate supervision and oversight of drones is important, especially in light of a series of high-profile accidents and near misses at airports, government buildings, and sports events. Yet it is just as critical for governments to make decisions that will not overly favor corporate interests or unduly give rein to consumer fears that turn out to be unfounded. Autonomous flying vehicles are almost certainly part of our future, but the decisions of governments now will determine how rapidly we get to that future. 

Tom Morrod is the Senior Director for Consumer Electronics, Broadband and Video Technology at IHS
Posted on 3 May 2016

Cypress Semiconductor announced that it will acquire Broadcom’s wireless Internet of Things (IoT) business in a $550 million deal. The deal was announced on Thursday, April 28, at the same time it announced that T.J. Rodgers will step down as CEO. The deal transfers Broadcom’s Bluetooth, Wi-Fi and Zigbee product lines, their associated intellectual property, WICED (Wireless Internet Connectivity for Embedded Devices) branding and developer network. In a press release announcing the deal, Rodgers stated, "Cypress is a significant player in the IoT today because of our ultra-low-power PSoC programmable system-on-chip technology, but we've only been able to pair it with generic radios so far. Now we have the highly regarded Broadcom IoT business—state-of-the-art Wi-Fi, Bluetooth and Zigbee RF technologies—that will transform us into a force in IoT and provide us with new market opportunities as well."

Cypress plans to move further into the consumer IoT market as well as build on its portfolio in its core business of embedded technology, including automotive and industrial applications. Broadcom will retain its smartphone, set-top box and wireless access businesses. The deal is expected to be completed in the third quarter of 2016.

Broadcom Ltd. was formed after Avago’s acquisition of Broadcom in February 2016. As part of management’s presentation to investors in May 2015, the combined company was billed as being “levered to numerous secular growth trends,” among them the connected home and Internet of Things (IoT) markets. However, Broadcom has stepped away from this market opportunity now with the sale of its wireless IoT business.

While this move may seem counter to the initial acquisition investor presentation mentioned above, there has been historical precedent for Broadcom Ltd. management to sell pieces of businesses that it acquires as part of or after the close of such deals. Not long after Avago completed the purchase of LSI in May of 2014, it sold the LSI flash associated business to Seagate for $450 million in cash and the LSI Axxia networking business to Intel for $650 million.

Such post-acquisition sales could take place due to a litany of factors including improving overall corporate profitability or exiting non-core businesses. Broadcom stated that revenue from the wireless IoT unit was about $189 million in the 12 months prior to the sale, with approximately 430 employees resulting in less than $440,000 per employee. This is much lower than the over $830,000 of revenue per employee for Avago as a whole according to its revenue of $6.8 billion and approximately 8,200 employees listed in its last 10-K filed in December 2015.

From another perspective, the asset sale may be a smart move for Broadcom. Broadcom’s entire corporate culture is built around serving top-10 OEMs in very large markets such as set-top boxes and smartphones. Broadcom’s goal is to become the number-one or number-two share leader in large markets. If it doesn’t have a clear path for achieving this goal, Broadcom re-evaluates its participation in that market, often either making acquisitions to double-down on its bet or divesting to exit the market.

This strategy has resulted in an organization that is very focused on the needs of specifically identified large OEMs while avoiding the distraction of mass-market customers that are likely to drive relatively low volumes. Illustrating this point is the fact that a non-disclosure agreement (NDA) is required to see the datasheets for many of Broadcom’s highest-volume products. In fact, Broadcom has never released a full datasheet for the BCM283x that serves as the processor for the Raspberry Pi, despite its enormous popularity in the maker community as a single board computer.

The sale of IoT wireless assets to Cypress may be a tacit acknowledgement on the part of Broadcom that its lack of mass market support infrastructure has become an obstacle to achieving success in the IoT market and that several years of effort trying to address that failing have come to naught. Broadcom’s line of WICED development tools was meant to solve mass-market support issues, but WICED has not proven to be enough. It really comes down to an issue of corporate culture. This divesture clearly signals that Broadcom Ltd. will concentrate its efforts on selling front-end module (FEM) integrated circuits (ICs) and Wi-Fi combo chips to its key mobile customers.

Companies such as Texas Instruments and Atmel have mass market support in their DNA, having made it a cornerstone of their corporate strategy over the course of a decade or longer. They have developed their websites, development tools, distribution and applications infrastructure to support tens of thousands of customers. They have encouraged and participated in user forums devoted to the use of their products. They have wholeheartedly embraced the maker community with tools, software, samples and abundant documentation. They even continue to support maker-friendly packages, such as through-hole dual in-line (DIP) packages which are no longer popular in high-volume production, but are still highly valued for prototyping and low-volume production. This is the kind of ecosystem that must exist around semiconductors that are marketed for the IoT market in order to be successful and it takes many years to develop.

Bottom line for Broadcom Ltd.: It is just following its usual playbook in this divestiture—failing fast to avoid throwing good money after bad. However, in doing so, Broadcom is potentially closing the door to one of the biggest emerging opportunities in the semiconductor industry, the IoT market.

The figures below place the revenues associated with this deal in perspective for Broadcom Ltd. IHS Technology’s published 2015 market share revenues for the products associated with this portion of Broadcom Ltd.’s business is $194 million, or 1.3 percent of its revenues in 2015. (Broadcom Ltd. stated trailing 12 month revenues as $189 million as of the end of April 2016.) Slightly more significant, these product revenues represent 4.3 percent of Broadcom Ltd.’s wireless application-specific IC revenues in 2015. Cypress Semiconductor earned only $3 million in wireless application-specific IC revenues in 2015. Almost all of Cypress Semiconductor’s revenue in wireless applications to this point has come from general purpose or programmable products, not application-specific products. With this acquisition, Cypress Semiconductor will take Broadcom Ltd.’s place as the second-largest supplier of WLAN and Bluetooth ICs for automotive, consumer and other applications as shown in Figure 3.

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Figure 1: Broadcom Ltd. Wireless Application-Specific IC Revenue - 2015

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Figure 2: Broadcom Ltd. Connectivity IC (WLAN/Bluetooth) Revenue - 2015

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Figure 3: Market Share Automotive, Consumer, Other WLAN/Bluetooth ICs - 2015

From the Cypress Semiconductor perspective, it is planning to market Broadcom’s IoT WICED brand products in consumer, industrial and automotive sectors. These three sectors all have a large number of customers with small sales revenues per transaction. Cypress has well established sales channels into these markets where it has been selling to its existing base of 30,000 customers through distributors and its sales force.

Cypress Semiconductor’s top three customers from 2015 were all leading global semiconductor distributors—Fujitsu Electronics, Avnet and Arrow Electronics. By contrast, over the past few years, Broadcom’s top customers have been global OEMs including its top two customers, Samsung Electronics and Apple. Cypress will be expected to achieve significant synergies from cross-selling its market-leading programmable system-on-chip (PSoC) product with Broadcom’s legacy product through its existing sales channels.

The ability to supply solutions in low-power efficient controllers, memory and connectivity solutions is crucial to a successful strategy in an era of IoT strategies for most semiconductor suppliers. In addressing this strategy, the synergy of component product lines through the acquisition of Broadcom connectivity solutions is very strong. Before this acquisition, Cypress already had a strong offering of deeply embedded products offering robust flexibility.

Cypress is one of the few suppliers of processors outside of field-programmable gate array (FPGA) suppliers that allow for user-configurable hardware through its PSoC microcontroller (MCU) product series. Through its acquisition of Spansion in 2015, Cypress significantly increased its application-specific MCU portfolio as well, especially in automotive, the largest market for MCUs and arguably one of the markets primed for connectivity solutions. The combination of the original Cypress PSoC series of configurable MCUs with Spansion’s highly customized MCU portfolio serves customers at both ends of the spectrum for design strategies. The Spansion acquisition placed Cypress as the eighth-largest MCU supplier globally.

However, what has been lagging from a comprehensive IoT strategy for Cypress has been connectivity solutions that serve customers that want preconfigured solutions that are industry standard with well-recognized IP broadly applicable across multiple connectivity design demands. With the acquisition of Broadcom, Cypress will be able to address the needs of a much broader customer base with a wider range of both configurable and preconfigured solutions targeting IoT strategies.

Bottom line for Cypress Semiconductor: It is building on its strengths in serving mass market customers and strengthening its competitive position in the IoT market. This investment in future growth is strongly aligned with consensus expectations of high-growth opportunities in the future IoT market.

IHS Technology provides data and analysis in the area of wireless semiconductors and IoT devices and connectivity. For greater detail on the competitive dynamics of the wireless semiconductor market, you can go to the Wireless Semiconductor Intelligence Service. Research can also be found in the IoT Devices & Connectivity Intelligence Service.

Contributors to this analysis are:

• Lee Ratliff, Principal Analyst
• Tom Hackenberg, Principal Analyst
• Christian Kim, Senior Analyst
• Brad Shaffer, Senior Analyst
• Dale Ford, Vice President & Chief Analyst

Dale Ford is the Vice President of Thought Leadership for IHS Technology
Posted on 3 May 2016

Held annually for three days at the China National Convention Center in Beijing, China, the 11th InfoComm China (IFC) is Asia Pacific’s biggest professional audiovisual (pro-AV) and information communications technology (ICT) trade show. This year, the show registered a record number of 287 exhibitors and 26,728 unique visitors.

The show this year was unique and different from previous shows and other industry shows, perhaps signaling a change in digital signage market dynamics. As a first, Samsung and other big liquid crystal display (LCD) companies were absent from the show. Second, light-emitting diode (LED) video walls with fine pixel pitch took center stage. Third, projection display products appear to be making a comeback, but seem to be limited to the Chinese market. These trends from IFC reaffirm our forecast that LED video technology is gaining a stronghold in the digital signage market, with fine pixel pitch LED video technology growing 85% year-over-year in 2016.

Samsung is the market leader in China for branded LCD displays for digital signage with a 7% market share. However, it was conspicuously absent at IFC this year, perhaps signaling an impact on its market position in China. This is especially telling as Samsung chose to return to other industry shows like National Association of Broadcasters (NAB) 2016 held at Las Vegas with dedicated large format displays for broadcast and LED video displays.

Despite Samsung’s absence, for other LCD display companies, super narrow bezel (SNB) video walls continue to be the focus. Several Chinese brands exhibited SNB displays. Tsingtoo showcased 1.4mm and 1.8mm bezel-to-bezel displays, Twinflag (a distributor for Vewell and Sharp) unveiled a 0.7mm bezel display from Vewell, and DET demonstrated 0.9mm bezel display.

There was also a great deal of excitement surrounding the organic light-emitting diode (OLED) displays exhibited by LGE, and transparent OLED by Leyard/Planar and Chinese brands Samplex and Viamax.

Fine pixel pitch LED video display companies like Leyard, Unilumin, Absen, Liantronics, and Aoto—five out of the top six brands according to IHS—took center stage at IFC this year, replacing LCD companies as the main exhibitors. All LED video brands exhibited fine pixel pitch products (<=1.99mm) boldly side-by-side with LCD digital signage displays and front projector and rear projection booths, allowing easy comparison. In the past, brands raced to flaunt the narrowest pixel pitch but now the differentiator is the total solution or system offered and the top brands are trying to specialize in different application markets.

Fighting the misconception of “projection is old technology,” projection brands were seen to be innovating in China. A marked difference at IFC China compared to Integrated Systems Europe (ISE 2016) and Digital Signage Expo (DSE 2016) is the high number of rear projection exhibits. Chinese brands launched new products such as rear projection with laser light source, ultra-narrow digital light processing (DLP) tiles at only 450mm thickness, and multi-point infrared touch capabilities, to compete with fine pixel pitch LED video and SNB LCD product launches. IHS believes that laser technology has the potential to be the game changer for the stagnant projection market. Laser light source allows instantaneous on/off, significantly increases the lifespan of projectors, and is much more efficient in producing desired color brightness, a wider color gamut, etc., compared to ultra-high-performance (UHP) lamps.

IHS observes that Chinese brands are catching up and offering innovative products using all display technologies at attractive prices. While the Chinese market indicates stable growth, the promise of higher profit margins will continue to motivate domestic brands to seek opportunities overseas.

For the full presentation, please go to https://technology.ihs.com/577883.

Vinita Jakhanwal is a Senior Director for IHS
Posted on 5 May 2016

In 2016, embedded touch panels such as in-cell and on-cell thin-film transistor (TFT) liquid-crystal display (LCD) and on-cell active matrix organic light-emitting diode (AMOLED) are showing strong growth in the touch display market for mobile phones including smartphones and feature phones.

Embedded touch means that the touch panel sensor is not independent, but integrated into the layers of the LCD or OLED panel—resulting in panel makers taking the job of touch panel makers. For many touch companies, their value add has been diminished since embedded touch was developed, because panel makers have a stronger stance since they integrate touch into the display.

According to IHS, touch panel shipments for mobile phone applications expanded by 11% from 1.30 billion units in 2014 to 1.44 billion units in 2015. Looking at the market share by panel type, embedded touch panels accounted for 43% in 2015, up almost 8 percentage points from 36% in 2014. The market share is expected to increase to 49% in 2016, and go over the 50% mark with 54% in 2017, surpassing the share of add-on types.

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Looking at the shipments and share of touch panels by technology, shipments of hybrid in-cell TFT LCD are forecast to increase to 74 million units in 2016, up 23% year-over-year as Japan Display Inc. continues to expand shipments to Chinese smartphone manufacturers such as Huawei and Xiaomi. Shipments of TFT backplane-type touch panels, which are being adopted by Apple, are also expected to rise 12% to 266 million units in 2016. As for the Vcom blocks type being supplied by panel makers like LG Display, BOE, Tianma and AUO, it is likely that shipments will increase by 164% with smartphone makers such as LG Electronics, Huawei, ZTE, Coolpad, Le Mobile and Lenovo expanding the adoption of Vcom blocks touch displays.

Moreover, shipments of on-cell AMOLED are projected to grow by 20% year-on-year to 266 million units in 2016. Samsung Electronics Co. is expanding the adoption of AMOLED panels to its mid- and low-end smartphone models like the Samsung Galaxy A, J and E series, and Samsung Display is increasing the supply of on-cell AMOLED panels to smartphone manufacturers such as Huawei, Oppo, Vivo, ZTE, Gionee and Meizu.

In the case of on-cell TFT LCD panels, which are primarily applied in low-cost smartphones, the improvement in the yield has allowed on-cell TFT LCD to be offered at more competitive prices. Therefore, panel makers including Innolux, BOE, Tianma, CPT and HannStar are expected to expand shipments to 110 million units in 2016, a 26% increase from 2015.

The reasons why embedded touch panels are steadily increasing their share in the touch panel market for mobile phones can be summarized as follows:

1) A stable supply of low-temperature polysilicon (LTPS) panels

2) Cost reduction through a simplified supply chain

3) Reduction in thickness via the integration of the display and touch panels

4) Improvement in added value

Along with the reasons above, the growth of embedded touch displays for mobile phones is likely to continue with shipments increasing steadily to 2017. Furthermore, embedded touch panels are expected to comprise more than 60% in 2020.

However, with the increase in embedded touch many questions are arising, and we look forward to answering these questions in our IHS Touch Panel Market Tracker.

The questions are:

• How will the touch panel supply chain change as embedded solutions gain popularity?
• As panel makers incorporate touch sensors into their display business, does it help LCD makers’ profitability?
• Embedded touch will gradually dominate mobile phone displays, but will it spill over to other applications like tablet PCs, notebooks and automotive?
• If Apple is going to adopt flexible OLED in its iPhone, what will be its solution? Embedded touch will have many technical challenges on the flexible polymer film or the encapsulation layer.       

David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 6 May 2016 

Monthly data from IHS shows a sharp rise in active matrix organic light-emitting diode (AMOLED) smartphone displays in March 2016 compared to the leading low-temperature polycrystalline silicon (LTPS) display technology.

At the start of this year, LTPS thin-film transistor liquid crystal display (TFT-LCD) panel shipments for smartphones were nearly 2.5 times as high as AMOLED display panel shipments. However, in March 2016 AMOLED smartphone panel shipments reached 32 million units—still below LTPS smartphone display shipments, but reaching the record high monthly, according to the IHS Technology Smartphone Display Shipment Tracker.

LTPS TFT-LCD has dominated the smartphone display market since Apple adopted it for the iPhone. While AMOLED has been used in high-end Samsung smartphones for some time now, mainstream use of the technology in mobile phones has been more limited. The gap between LTPS TFT-LCD and AMOLED is now narrowing, however, as costs decline and more smartphone brands warm to AMOLED’s thinner and lighter form factor, better color saturation, greater contrast ratio and other differentiating features like flexibility.

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IHS Technology has been tracking smartphone display shipments by technology, display suppliers and size in a monthly manner. In fact, unit shipments of AMOLED smartphone panels increased 23 percent to reach 31.7 million units in March 2016, compared to the previous month. This is the first time AMOLED shipments surpassed the 30 million per month unit mark since the technology was first adopted for smartphones. AMOLED market share in smartphones reached 21 percent in March 2016, up from 12 percent in March 2015.

Samsung’s increased use of AMOLED displays in its low-end and mid-range mobile phones, along with growing demand from Chinese brands, is primarily driving the current surge in the technology, according to the Smartphone Display Shipment Tracker. OPPO, Vivo, Gionee and other Chinese brands have already added AMOLED smartphones to their product lineups, while Huawei and Xiaomi are now considering adopting the technology for upcoming new models. Apple is also reported to be weighing AMOLED displays for its iPhone models in 2017.

Apparently, increasing adoption of AMOLED by smartphone brands will keep driving the growth of AMOLED smartphone display shipments. Furthermore, it will encourage more display manufacturers and component suppliers to shift their capacity and resources to the growing AMOLED industry. Although Samsung Display is still the major dominant AMOLED smartphone panel supplier, three Chinese panel suppliers—EverDisplay, Tianma and Visionox—are starting to have some breakthroughs in the AMOLED manufacturing yield rate and are planning to ship AMOLED smartphone display panels to Chinese smartphone brands.

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David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 9 May 2016 

In late April a few big announcements in as many days came in quick succession—first from Alphabet (Google’s parent company), then Apple, Facebook, and finally Amazon. The headlines were unambiguous: Alphabet missed expectations and Apple declined, while Facebook and Amazon absolutely surged. As four of the largest tech companies in the world slog it out on the world stage, is something fundamentally changing in their industries that accounted for the shifting fates and expectations in the first two but spurred glorious growth in the latter two? And what are they betting on to drive future growth?

It’s worth reviewing what happened this last quarter and why companies did well, or badly. Alphabet actually grew although not by enough, having overspent on a wide variety of intended moonshots,  big bets, and experimental programs—from laying fiber to launching a content delivery network, revamping its cloud service platform, creating AI for Go, sending up high-altitude drones, and investing in satellites.

Apple was impacted by something more prosaic: a decline in year-on-year (YoY) quarterly revenue for the first time in 13 years—basically since iTunes was released—caused by continued reduced iPad sales, the second straight quarter of lower YoY Mac sales, and the first-ever YoY decline in quarterly iPhone shipments. Still, the wider context shows Apple mopping up around half of Silicon Valley’s technology company profits, taking in over $10 billion, compared to Alphabet’s $4 billion and dwarfing Facebook’s $1.5 billion, so Apple isn’t in any immediate danger or trouble.

Facebook announced a stellar quarter in a departure from the previous three companies. Driven by growth in mobile ad sales, Facebook outperformed expectations and managed to grow its war chest despite major purchases such as Instagram, a huge increase in capex on data centers and servers, and big investments related to global expansion moves including a recent thwarted attempt to roll out its Free Basic partially closed version of the internet in India, where it has met resistance with net neutrality.

Last but by no means least, Amazon continues a rapid transformation from online retailer to cloud compute, storage, and devices. In a sign of how the company is positioning for the future, Amazon Web Services (AWS), Amazon’s B2B cloud compute and storage business, recorded over 60% growth, raking in $2.6 billion in revenue and, perhaps more importantly, becoming the single largest contributor to Amazon’s operating profits and essentially balancing out poor earnings in the giant’s international retail business.

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Reading into the fates of a small number of enormous companies is like reading tea leaves. Facebook’s recent success in the face of Apple’s slowdown may suggest that a shift from hardware to platforms is in the cards, further intimated by Apple posting YoY growth in services (apps and content) of 20% on a total value of $5.9 billion, more than all of Facebook’s revenue. Where Apple loses out, Alphabet may gain via Android. Where a slowdown in smartphone hardware sales may destabilize the growth engine for Apple, the beneficiaries of the increased global installed base of devices will be service platforms like Alphabet, Amazon, and Facebook. Consumer willingness to pay via ads rather than on closed platforms may also underlie some of these changes and may be helping to drive value to B2B services supporting those platforms, rather than trying to capitalize on direct consumer spend.

The nuances in this story relate to tactics, markets, consumer interest, device ecosystems, and a myriad of local factors—not least, content and connectivity. Speculation on the short-term winners and losers in the market is important and interesting, but perhaps even more significant is to examine what each of the companies is pinning its future profitability on.

Alphabet is perhaps the most vocally forward-thinking in cannibalizing and redefining its own business, with a huge number of explicit and implicit investments in areas from artificial intelligence (DeepMind), to smart home (Nest and DropCam), to VR (Cardboard), to drones (Project Loons and Wing), to satellites imagery (Skybox), to consumer internet provision (Google Fiber), to driverless cars, as well as a significant push of a range of B2B cloud and data transmission services. Equally as interesting is the planned divestment of robotics group Boston Dynamics, although it is instructive to view that in terms of team integration and time to market as well. Alphabet bet big and widely across many market, and so leads the pack in absolute R&D spend. In the first quarter of 2016 alone Alphabet not only outspent Apple’s entire annual R&D budget, it also spent twice the combined total of Apple, Amazon, and Facebook’s R&D during that same three-month time period for the first quarter this year.

Apple, for its part, has remained typically cagey, but is still talking up the Apple Watch (and by extension, wearables) as a growth driver. While this may not look as convincing right now, investment in AI on Siri might suggest a longer-term strategic position around personal assistants, search and generalised AI. Other long-suggested but as yet not public strategies include electric car and  machine-learning for connected car, most clearly showcased in the recent $1 billion investment into China’s Didi Chuxing ridesharing platform. A significant investment in automotive technology would certainly go a long way to explaining the $8 billion Apple spent on R&D in 2015 (since the Apple Watch was developed), which has not led to any noteworthy consumer technology, and is around eight times the amount spent on developing the iPhone.

Meanwhile, Facebook—much like the other Silicon Valley giants—has showcased wide-ranging machine-learning initiatives allowing for things like facial recognition, but has taken a step further and announced what it calls the Bot Engine, which will run a platform called Bot for Messenger. This is essentially Facebook’s AI platform, but not only will it respond to requests, it will also start conversations such as asking if you’d like the top news stories. The other major future investment is on its virtual reality business Oculus, which, much like Apple’s play toward wearables, is premised on a change ostensibly in the future involving the core human interface with consumer electronics and technology. Facebook is, like Alphabet, also investing in data transmission drones, an extension of global internet infrastructure to spread its service to new geographies of consumers.

Amazon is, in many ways, the clearest example of what all these companies are doing—diversifying their spoils from the internet era into future technologies for the next decade. Amazon’s recent investments in online content via Amazon Prime and Kindle, its device-as-shopping-trolley, were early moves away from selling physical goods via the internet. More recently illustrative is the Fire TV platform, now reaching into almost 14 million homes—a scale comparable with some of the largest global pay-TV operators. In fact, the launch of late of Amazon Video Direct is a clear play toward becoming a platform operator in a more variegated sense than Amazon Prime’s VOD catalog has allowed.

Outside of media and associated devices, Amazon is investing in a global supply chain to rival DHL or Fedex, automated delivery, and advance drone technology for navigation and imaging. And let’s not forget Amazon’s own play in AI via Alexa, now hosted on Amazon Echo and the new Echo Dot and Tabs—all ways to control and channel buying behavior in the home.

While the most recent round of reporting might suggest that there are some more fundamental changes within the industry, the wide array of future technologies being invested in provides tantalizing hints at the future of big tech. Artificial intelligence, wearables, connected cars, virtual reality, and next-generation data infrastructure all come up in the current portfolio of future technologies and moonshots on the books for the biggest companies in the industry. Overall, Alphabet, Apple, and Facebook make profits in the range of $50-70 billion per year and have a combined war chest of almost $300 billion in cash—70% of which is Apple’s—to invest in the next decade of must-have consumer and commercial technology.

Like the diversification of major industrial companies in the 20th century, where global behemoths such as General Electric, Mitsubishi, Siemens, or Sony branched out across heavy industries, finance, shipping, and consumer, the new web giants are balancing their future opportunities on a small core of their successful present.

Alphabet and Facebook are the big winners in online advertising for search and social, respectively, while Apple has led the most profitable end of the smartphone surge and Amazon has capitalized on the shift to online retail. Combined they spent almost $22 billion on research and development last quarter alone and hold over $300 billion in cash to acquire companies or invest in technology.

As they place their bets on the future and branch out into new technologies, services, industries, and business models, they all retain a foothold in their core businesses—cash cows that define their current position and influence future decisions. Keeping an eye on where the money goes will be a key indicator on what happens not only in the next 5 years but also over the next 15.

Tom Morrod is the Senior Director for Consumer Electronics, Broadband and Video Technology at IHS
Posted on 16 May 2016

The SEMICON Southeast Asia (SEA) 2016 conference in Penang, Malaysia, gathered experts in the region and highlighted microelectronics and industrial automation innovations from the semiconductor industry.

The focus of the conference continues to be around the hot topic of “factory of the future” or “smart manufacturing,” which generally refers to the use of technology to increase automation in the manufacturing process. The smart manufacturing concept usually focuses on the use of technologies like sensors, networks, software, analytics and equipment automation that digitally connect manufacturing factories. These technologies enhance a factory’s intelligence by not only connecting standalone plants with other factory sites, but also connecting machines and processes within a factory using Internet of Things (IoT) solutions and merging existing industrial infrastructures with cloud computing. 104 million new nodes were connected to industrial automation networks in 2015—an increase of 8.5% year-over-year from 2014 that reflects the rapid adoption of technologies aimed at creating the factories of the future.  

Many semiconductor manufacturers like Global Foundries, Advanced Micro Devices (AMD) and SanDisk demonstrated several ways to implement automation in their manufacturing facilities at SEMICON SEA 2016, highlighting their vision of “factory of the future” and continuing to drive the automation trend. IHS believes that in the short term, the benefits of automation will be limited for the semiconductor industry in Malaysia due to process complexity, high cost and non-technological aspects including cybersecurity and a lack of skilled engineers.

Semiconductor manufacturing processes can generally be divided into three categories: wafer fabrication, assembly and test. Due to process complexity, the adoption of automation technologies in wafer fabrication facilities is expected to outpace the adoption rate in assembly and test facilities. In Malaysia, more than 80% of semiconductor manufacturing plants are assembly and test despite semiconductors and circuit boards accounting for 20% of total exports. For this reason, IHS does not expect a big impact in the short term on high-end industrial automation solutions in Malaysia that would involve a rapid adoption of smart machine and industrial robots.

Bringing automation to industrial manufacturing equipment is also a high-cost endeavor. Manufacturers are likely to address the automation issue first by focusing on the lower-cost option of automating information handling, which would entail solutions that enable digitization of the data generated in the manufacturing process. This is particularly relevant as the semiconductor industry in Malaysia continues to face rising costs and increased competition from neighboring countries like Vietnam and Indonesia. Hence, the benefits from automation in Malaysia will have limited impact in the short run.

In addition to the technology aspect of “factory of the future,” a few critical areas need to be addressed that may currently be acting as inhibitors to the market:

• Cybersecurity is one of the main concerns as large amounts of data and information are being collected throughout the factory. 
• The lack of availability of skilled engineers in the field of smart manufacturing is a challenge for semiconductor manufacturers.

Because of these factors, companies are still taking baby steps towards implementing smart manufacturing in Malaysian facilities. Collaboration between hardware suppliers and IT companies as well as active funding from government authorities like the Malaysian Investment Development Authority (MIDA) will play an important role for semiconductor players that are embracing automation and smart manufacturing. Once the benefits of productivity and efficiency through smart manufacturing initiatives have been realized in the Malaysian semiconductor industry, implementation decisions will be easier. 

Vinita Jakhanwal is a Senior Director for IHS
Posted on 17 May 2016

By definition, the total cost of ownership (TCO) of a system is a financial estimate aimed at helping the owner determine all costs associated with the system, direct and indirect. Applied to distributed antenna systems (DAS), the TCO is the sum of the capital and operational expenditures detailed in the Exhibit below. Capital expenditures are funds used by the company to either acquire or upgrade a DAS system, while operational expenditures represent the cost of running the DAS system.

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Large mobile operators such as AT&T Mobility and Verizon Wireless have been using DAS for the past two decades to improve network coverage in venues where the traditional macrocell approach does not work. In recent years, driven by a major telecom restructuring in 2008, China rose quickly to significance and became the world’s second-largest DAS market after the US. As mobile networks have migrated from 2G to 3G and 4G, DAS architectures have evolved from passive to active, in which repeaters are replaced with low power remote radio heads connected to the DAS hub and capacity is added to handle the new demands of mobile smartphones.

However, the unabated smartphone-generated traffic growth experienced at major events such as the Super Bowl and the FIFA World Cup keeps mobile operators and venue owners busy with major network upgrades to stay ahead of the curve. Alternatives to offload traffic from the cellular network—such as WiFi, and more recently, small cells that densify existing macrocell networks—have been threatening the well-established DAS option, pushing major DAS players to innovate and find new ways to stay competitive. As cost is always the decisive factor, a framework is needed that starts from a tactical analysis of the total cost of DAS ownership and addresses the most significant cost points through innovative DAS designs and features.

IHS just published a technology paper that shows how DAS innovation can substantially address major cost points in capex and opex and ultimately lead to a lower TCO.

Topics covered in the paper include:

• TCO reduction starts with tactical DAS capex and opex analysis
• Optimizing DAS equipment installation time and cost and minimizing footprint can significantly decrease capex
• Five features that optimize DAS installation time and cost
• But alternate deployment models such as centralized DAS (C-DAS) lower capex and opex substantially
• Then, high signal quality and operation and maintenance tools will contribute to lower opex
• And finally, for enterprise applications, femto/microcells can certainly bring a compelling low cost variation to DAS

The DAS paper can be downloaded here: on.ihs.com/27B2F5Z

Stéphane Téral is a Sr. research director, mobile infrastructure & carrier economics for IHS
Posted on 19 May 2016

With the growing adoption of wide color gamut solutions in the high-end display market, wide color gamut technology is emerging as a key requirement for premium displays.

According to the latest IHS Wide Color Gamut Market Tracker, display industry leaders Samsung Electronics and LG Electronics have chosen wide color gamut technology as a major selling point for their premium displays and are looking to become the first movers in the high-end display market with differentiated wide color gamut solutions. Organic light-emitting diode (OLED) displays that are already used commonly in the smartphone market are driving the growth of the wide color gamut display market. In the meantime, TVs with quantum dot (QD) and OLED technology are increasingly entering the TV market and are a core display market segment.

Companies are considering applying wide color gamut solutions to monitors and notebook PCs, so the wide color gamut display market is expected to grow continuously to a 27% share of the total display market on an area basis in 2021.

Despite being unaware of wide color gamut technology, consumers are already familiar with wide color gamut displays. For instance, those who are using smartphones by Samsung Electronics, a leader in the OLED smartphone market, are experiencing the technology first hand. LG Electronics has also launched diverse advertising and promotional campaigns highlighting the superiority of OLED TVs over the past years. LG Electronics believes that these efforts have helped consumers perceive OLED TVs as premium products.

Wide color gamut technology is most widely adopted in the smartphone market, with OLED holding an overwhelming market share among wide color gamut solutions. Thanks to its self-emitting property, OLED is superior in terms of color reproduction. Samsung Display is attempting to expand the supply of OLED displays to Chinese smartphone makers in addition to its major customer Samsung Electronics, so the adoption of wide color gamut displays is expected to grow further in the smartphone market.

Samsung Electronics and LG Electronics, the world’s number-one and number-two TV makers, have chosen wide color gamut as a major selling point. They are promoting the technology in an attempt to dominate the high-end TV market; for example, Samsung Electronics is promoting QD TVs in 2016, claiming that wide color gamut solutions are essential for premium TVs. In fact, the company has used QD in its premium ultra-high definition (UHD) TVs since 2015.

LG Electronics boasts of its OLED TVs as the best wide color gamut displays. The company has made significant efforts to increase OLED TV sales with continuing advertising campaigns and improved price competitiveness. In addition, LG Electronics is providing a wide range of sales promotions to familiarize consumers with OLED TVs while offering warranty services for the relatively expensive TVs.

According to the IHS Wide Color Gamut Market Tracker, aside from OLED and QD, technologies like light-emitting diode (LED)—LED packages and color filters—have been improved by panel makers. LED solutions are still deemed the most competitive wide color gamut technology in terms of production cost. LED TVs have failed to attract the attention of consumers in the past, probably because of high prices and low interest in color reproduction. Nowadays, however, phosphors with high purity and high performance are being applied to mass-produced products, and considerable improvements have been made in terms of color reproduction. Therefore, there has been growing adoption of LED solutions in the mid-range TV, monitor, and notebook PC market where price competition is especially fierce.

Furthermore, along with wide color gamut solutions, high dynamic range (HDR) technology began to be used as a selling point in the TV market in 2015, receiving favorable responses from consumers. The growing attention to new technologies like HDR will also likely contribute to the expansion of the wide color gamut display market.

Simply put, driven by three factors—improved understanding among consumers, enhanced technologies such as OLED and QD, and marketing campaigns focusing on premium displays—the wide color gamut display market is forecast to grow steadily. The share of wide color gamut displays hovered around 3% in 2015, but it is projected to be 27% of the total display market in 2021. Wide color gamut technology will become a key requirement in the high-end display market. 

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David Hsieh is Director of Analysis & Research within the IHS Technology group
Posted on 23 May 2016