With the booming sales of Digital Televisions (DTVs) and the looming digital broadcast switchover in the United States and elsewhere, you might think that 2008 would have been a great year for the DTV semiconductor market.
However, in a year full of surprises for the business, DTV semiconductor industry revenue actually declined in 2008 as the overall woes of the broader economy cut consumer demand, limiting total shipments and revenues for the year.
Global DTV semiconductor revenue is set to decline to $7.95 billion in 2008, down 1.1 percent from $8.04 billion in 2007, according to iSuppli Corp. The attached figure presents iSuppli's estimate and forecast of global, annual DTV semiconductor revenue.
DTV DISAPPOINTMENT
“The decline in revenue comes as somewhat of a shock to a DTV semiconductor market that had seen strong growth and even stronger growth prospects all the way up to the first half of 2008,” said Randy Lawson, senior analyst for digital television and display electronics at iSuppli.
“The DTV semiconductor market in recent years had enjoyed robust year-on-year revenue growth due to the rapid transition to newer television display technologies and the arrival of increasingly feature-rich sets that sport higher resolutions and advancements in image processing. The year 2008 started with optimism due to the summer Olympics and the looming North American DTV transition. However, as the year progressed, the overall woes of the broader economy cut consumer demand and consumption of DTV semiconductors, limiting total shipments and revenues for the year.”
CONSOLIDATION NATION
Amid the market contraction, the specter of consolidation materialized, with Broadcom Corp. acquiring Advanced Micro Devices Inc.'s (AMD's) DTV chipset business. This was a eagerly anticipated move for both companies, as AMD sought to focus more on its core businesses and Broadcom strived to broaden its customer base and consumer-oriented TV chip business beyond its mainstay in set-top-box offerings. Lawson said he expects to see Broadcom chips in newer television sets in 2009 as the company broadens its base of customers and television models.
Another acquisition late in the year was Integrated Device Technology Inc.’s pick up of the Silicon Optix Reon processor family line and Hollywood Quality Video (HQV) video processing Intellectual Property (IP).
Also during the year, Zoran acquired a French company, Let It Wave, which has IP in the area of frame rate conversion. This indicates the growing importance of 120Hz processing technology in all television markets, even sets branded by Original Design Manufacturers (ODMs).
SURPRISE, SURPRISE
Beyond the revenue decline, 2008 brought other surprises for the DTV semiconductor industry, including the rise of the Taiwanese Integrated Circuit (IC) suppliers in the DTV semiconductor market and the impact of the Digital Terrestrial Television (DTT) broadcast transition to the television semiconductor market, especially in regions that use the DVB-T standard. Furthermore, after years of disaggregation, the captive business model made a shocking comeback in the global DTV semiconductor industry.
TAIWAN MOVES AHEAD
Taiwanese IC suppliers in 2009 continued to gain share in the market at the expense of their Western competitors.
This was particularly evident in the rapid demise of U.S. chip supplier Trident Microsystems, the 2007 market leader, due in part to large loss in share at two of the leading TV OEMs. Trident lost the top spot in the DTV IC market to Taiwan's Mediatek in the first quarter of 2008. Moreover, another Taiwanese chip supplier, MStar, gained share in the worldwide television processor market.
Other Taiwanese companies announced moves into the DTV video processor segment as well. Suppliers such as Himax Media Solutions and Novatek are targeting this market.
“The rise of the Taiwanese supplier base for DTV ICs will be a development to keep track of in the coming years as controlling costs remains a top priority for the television OEMs in the highly competitive consumer TV market,” Lawson said.
DECODING TECHNOLOGY TRENDS
On the semiconductor technology front, several IC vendors announced or began sampling advanced decoder solutions for iDTVs, i.e. DTVs with integrated digital tuners. These new video processor chips add support for more advanced codecs, such as MPEG-4, H.264 and VC-1, all of which are expected to enjoy much higher usage in iDTVs and digital set top boxes during the coming years.
“This is because some parts of the world, especially those using DVB-based broadcast standards, are adopting MPEG-4 for terrestrial, cable and satellite broadcasts,” Lawson said. “Perhaps more importantly, such multi-format codecs are gaining popularity as more video content is sourced from the Internet, where multiple codec formats are common, and require much higher compression efficiency than current MPEG-2 solutions can provide.”
Another new feature, wireless High-Definition (HD) interfaces, began to be offered on some higher-end television models using chipset solutions based on the WHDI and WirelessHD standards, as well as other proprietary solutions.
RETURN TO CAPTIVITY
Bucking the trend of market share gains for third-party chip suppliers in the DTV video processor market, 2008 saw the return of the captive IC vendors, most of which are also TV OEMs, including Samsung, Sony, Toshiba and Panasonic.
In recent years, sales trends have favored the use of third-party DTV IC solutions due to a number of factors, including cost, time-to-market and the rising use of ODM production. However, since early 2008, iSuppli has been tracking a growing amount of revenues in the captive DTV IC market, most likely due to pullbacks in ODM television build engagements by some of the larger TV OEMs, as well as a move to protect and secure internal businesses.
DISPLAY DRIVERS FEEL ECONOMIC IMPACT
Another segment of display electronics that suffered the impact of the second half downturn was the display driver semiconductor market.
Flat-panel display production stumbled in the second half of 2008 due to the same market factors already weighing on demand for panels, especially in large-sized applications. This severely cut demand for large-sized display drivers in the fourth quarter, turning what was expected to be almost a flat period for revenue growth into a down year relative to
2007.
Several large semiconductor vendors in this space have guided for abnormally large declines for end-of-the-year driver IC shipments, another indicator of the downward trajectory in 2008 and early 2009 DTV IC shipments and revenue.
BRIGHTER PICTURE AHEAD FOR TELEVISION CHIPS?
Despite the changes seen in 2008, and the near-term gloom-and doom news for semiconductors, there is room for optimism in the television display electronics market.
Semiconductor-rich televisions based on flat-panel display technology continued to show market-share growth throughout 2008. Around the world, the transition to DTT broadcast continued to gain momentum and will help increase the IC content of DTVs as more decoders and digital tuner modules are required in such television sets.
In a move showing strong confidence in the DVB standards and in the DTV and Set-Top Box (STB) markets all over the world, the DVB organization in Europe approved a “post DVB-T” standard: the DVB-T2 modulation specification.
This specification will enable even higher broadcast system efficiencies that will allow for increased digital channel offerings and/or more High-Definition (HD) channels in nations and regions where DVB-T adoption is already reaching maturity.
Shipment of full-HD resolution capable TV sets increased in 2008, accompanied by higher adoption rates for advanced features such as 120Hz refresh, LED backlighting and even new wireless interfaces that allow connections to HD sources. These enhancements in features and functionality continue to expand IC content for these sets and represent a harbinger of good things to come for the broader television market.
Find out more about the DTV semiconductor segment with Lawson's latest report entitled: HDTV Gets Wired for Wireless: Cutting the HD Cord in Consumer Electronics. For more information on this report, please visit: http://www.isuppli.com/ProductDetail.aspx?ID=28206
iSuppli Corporation, www.isuppli.com
