Analog ICs Are Alive and Well

Although past expectations of an analog IC demise in the "digital" age were substantially overblown, the digital revolution has been notable in reshaping the nature of the analog IC market. In an analog world, analog ICs were largely assigned to signal processing roles. And although some of the hottest new digital multimedia products involve audio/video signal processing, the growth of digital equipment has boosted the interface and power management segments of the analog IC market at a faster rate than the analog signal processing segment.

Two of the faster growing electronic products in 2006 were digital mobile handsets, with a 21% unit growth rate, and digital TVs, with a 93% unit growth rate. And while both of these products make extensive use of digital ICs, they also use analog ICs in substantial volume; both of these products have ~25% of their semiconductor content coming from analog ICs. But the mobile handset market is the more important of the two products, accounting for $9.9B in analog IC revenue in 2006, while digital TVs consumed only $1.5B worth of analog ICs. Mobile handsets will remain the largest single application for analog ICs in the future, even as the mobile handset market slows.

Although it may seem to be something of a paradox, analog ICs represent the largest single revenue category in digital mobile handsets. Of course, baseband and RF signals, as well as power needs, are handled by analog ICs. Over the past decade, mobile handsets have been one the most important drivers of the analog IC market, providing 23% of analog IC revenue in 2006. The 26% analog IC content in handsets is split between standard linear and application-specific analog ICs, which account for 6% and 20%, respectively.

By contrast, digital TVs really do have a high "digital" content with MPG decoders, LCD drivers and other digital processing functions joining the analog signal processing and power supply functions. Analog ICs represent the second largest category of devices in the average digital TV, although differing digital TV display technologies can have various analog IC contents. The 25% analog IC content in digital TVs is split between standard linear and application-specific analog ICs, which account for 5% and 21%, respectively, of the total DTV semiconductor revenues.

Handset, digital TV and other consumer electronics contribute to analog IC revenue.

The growth rate for the analog ICs that go into digital TVs has been a slowing trend since 2003, as the market has emerged from the early growth stage. After 2007, the digital TV market is expected to enter a more mature phase where both digital TV unit growth and the associated analog IC revenues will drop into low double-digit growth rates.

But over the five-year forecast period (2006-2011), the analog IC revenues attributed to digital TVs will grow three times faster than those from the mobile handset market (a 21% CAGR vs. 7% CAGR). But the mobile handset market will remain substantially more important to the analog IC market as analog IC revenues derived from mobile handsets, which were six times larger than those from digital TVs in 2006, will still be three times larger than those from digital TVs in 2011. But digital TV revenues will make up the analog IC revenue loss because of some slowing of the digital handset market over the coming five years.

The Figure shows the relative importance of the equipment end-markets to the analog IC revenues over time, including the forecast out to 2011.