Despite growing chip integration, demand for discretes will rise – by James Carbone

However, unit shipments and revenue in 2018 won’t be as strong as 2017 when sales and shipments increased by about 11 per cent

The discretes semiconductor market will rise 3.1 per cent annually over the next five years and will be less volatile than in the past, according to researcher IC Insights.

Discretes revenue growth will be slow, but steady compared to previous years when revenue would spike upwards one year and decline the next. The worldwide discretes market will increase from $24.6 billion in 2017 to $28.7 billion in 2022, said IC Insights.

Discretes revenue will grow despite modest declines in average selling prices. The overall average price for discrete device from 2017 to 2022 will decline 0.9 per cent from 5.8 cents to 5.6 cents, the researcher said.

Unit shipments of discretes will increase about 4.1 per cent during that time rising from 421.2 billion in 2017 to 513.8 billion in 2022.

“We are seeing huge demand across all discrete product lines, including MOSFETs, rectifiers, thyristors and IGBTs,” said Andrea Tranchida, director of marketing power and discrete devices for STMicroelectronics, based in Geneva, Switzerland. “Demand is strong across all segments” especially for power MOSFETs.  “We are seeing a relentless increase in demand and there is not any sign demand is slowing down,” he said.

The discretes market includes diodes, small signal transistors and switching transistors, power transistors, rectifiers, thyristors, varactor tuning diodes, and selenium rectifiers. Power transistors is the largest product category accounting for 58 per cent of discretes revenue in 2017, according to the researcher. Power transistors include MOSFETs, bipolar power transistors insulated gate bipolar transistors (IGBT), RF and microwave power transistors and Darlington power transistors.

Ron Lineback, senior market research analyst for IC Insights, said discretes unit demand increased 11 per cent and sales grew 11.4 per cent in 2017, which was “four times greater than its average growth rate over the last 20 years.” As a result, lead times stretched and prices increased for some discretes, including MOSFETS. The good news for buyers is demand won’t be as robust in 2018 as unit shipments will rise about 6 per cent and sales 5 per cent. The average price of a discrete will decline by about 1.2 per cent, said Lineback.

Slower growth rate

Discrete sales growth will continue in 2018, although at a slower rate, because of healthy economic growth in different regions of the world, he said.

The discretes market is often volatile because many discretes are low-cost products and there are often multiple sources for them. For the most part, there’s little concern that discretes will be available even if there is a sharp increase in demand.

Buyers will often purchase large volumes of parts when there is strong demand for the systems that their companies build, but then cut back purchasing discretes when the forecast for end products slows.

“Purchasers at system makers cancel purchase orders as soon as they think there may be some economic slowdown or some problem in the marketplace,” said Lineback. “They will then come back and build up inventories” when demand for their end systems increases, he said.

That’s what happened last year. “We saw some of the inventories being built up last year,” said Lineback. “We don’t think we’ll see that going on this year and that’s why the growth rate is going from almost 12 per cent to 5 per cent. But we don’t see a hard fall,” he said.

In the longer term, “we still see discretes growing even though the common wisdom is everything is getting integrated onto an integrated circuit,” said Lineback. Despite the trend towards more chip integration, demand for power discretes will continue and “we are seeing a whole range of new applications emerging” that need discretes.

“The fact is can’t you cannot build a product without discretes,” he said.

Discretes needed for automotive

One growing customer segment for discretes is automotive. It’s no secret that electronics content, including discretes, in vehicles is increasing in conventional gasoline-powered vehicles as well as electric vehicles and hybrids.

Tranchida said “new generation of cars particularly EV and hybrid will boost adoption” of discretes, especially IGBTs and MOSFETs, said Tranchida.

“With EVs it is not just about the car itself. It is also about the infrastructure that goes around the EV,” said Tranchida. He noted that fast-charge stations will need to be built “which is an opportunity for power discretes.”

Other customer segments that will drive demand for discretes include consumer, industrial, computer, and communications. Consumer is the biggest segment for discretes accounting for 26 per cent of discretes revenue followed by industrial, 23 per cent and automotive, 19 per cent, according to IC Insights.

For the rest of 2018, buyers can expect tight supply and long lead times for many discretes, especially MOSFETs because of growing demand from multiple customer segments. However, suppliers are adding capacity and after 2018 there should be enough capacity in place to meet the requirements of systems manufacturers  over the next five years, said Lineback.

He noted that there are many established discrete manufacturers for discretes including Infineon, ON Semiconductor, STMicroelectronics, Rohm,  Renesas, Vishay, Nexperia, Fuji Electric, Microsemi and Toshiba. With demand remaining strong manufacturers should increase capacity. In addition, there are growing number of discrete manufacturers in China which could further boost supply.

Emerging Asian discrete manufacturers may help mitigate the impact on capacity caused by recent consolidation among discrete semiconductor manufacturers. In recent years, Infineon bought International Rectifier, ON acquired Fairchild and QUALCOMM purchased NXP.

Growth for GaN discretes

While consolidation is one trend that semiconductor buyers should watch, they should also keep an eye on emerging use of gallium nitride and silicon carbide in discretes, according to Lineback.

“Gallium nitride and silicon carbide make MOSFETs much more efficient, but the problem is the cost of those materials is higher than silicon,” said Lineback.

Despite the cost, “gallium nitride is getting a lot of momentum with most major discretes manufacturers making gallium nitride MOSFETs,” said Lineback.

GaN transistors have about one-tenth the resistance of silicon-based transistors, according to Cambridge Electronics, which develops GaN chips. Such lower resistance results in higher energy efficiency and faster switching so that power electronic systems can be manufactured much smaller.

Increased energy efficiency means computers and data centers will use less electricity reducing energy costs. Gallium nitride transistors used in electric cars can boost the power output of the car, make it more energy efficient and lighter, allowing the car to drive farther per charge.

Gallium nitride discretes can be used in power supplies, wireless charging systems, solar power systems in computers and telecommunications equipment.

Some manufacturers are manufacturing silicon carbide discretes because SiC devices can sustain higher voltages and currents than silicon. In addition, SiC chips can be shrunk in size reducing resistive losses and operate up to 400 degrees C compared to 150 degrees for silicon.

SiC chips are also better able to handle other disturbances besides heat, including radiation and intense electromagnetic fields. They can be useful in military applications.

Because they are more efficient and the cost is falling, the GaN/SiC power transistor market will grow over the next five years. Sales were just $105 million in 2017 and are forecast to reach $870 million in 2022, which is a compound annual growth rate of 52.6 per cent, said IC Insights.

GaN/SiC power transistors, excluding RF and microwave power transistors, represented just 0.8 per cent of total power transistor sales in 2017 and are projected to reach 5.5 per cent in 2022, the researcher said.  Total GaN/SiC power transistor and diode sales were $216 million in 2017. SiC-based diodes have been on the market since early last decade, while GaN/SiC power transistors have been available for about six years.

The bad news for buyers is there are fewer second sources for GaN and SiC discretes than silicon products, which might be holding back growth in addition to the higher cost of compound semiconductor (wide-bandgap) technology when compared to conventional silicon devices, IC Insights said.