Future of Embedded Systems Technology

Report Highlights

• The world market for embedded software will grow from about $1.6 billion in 2004 to $3.5 billion by 2009, at an average annual growth rate (AAGR) of 16%.
• Embedded hardware growth will be at the aggregate rate of 14.2% to reach $78.7 billion in 2009, while embedded board revenues will increase by an aggregate rate of 10%.
• Embedded components are being propelled by three factors (1) ASPs are higher than stand-alone chips, (2) their unit sales are cannibalizing the consumption volume of stand-alone MPUs, ASIC, FPGA and DSP; (3) and, the growth of system-on-a-chip components.

INTRODUCTION

Developments within the semiconductor industry constitute one of the most interesting subplots of the rapid innovation in the high-tech industry. As pressure continues to achieve higher levels of device integration while reducing cost, size and complexity, the issue of process innovation has become very significant. Plus, economic and market forces are fueling the market. All of which makes it pertinent to comment on current trends (market and technology), as well as to assess potential breakthroughs in the near- and long-term future.

To accommodate exponential growth demands for larger and faster transistors, chip designers and manufacturers constantly have pushed the envelope of technological, physical and design constraints. Various innovations and paradigm-defining ideas have taken shape as a result. The embedded systems concept is one significant trend in this context.

This BCC report examines the embedded systems market, its fundamental basis, key technology drivers, primary use, critical applications and component segments. The report provides an up-to-date analysis of recent developments and current trends in the marketplace. The identification of significant revenue growth drivers in specific product categories is an additional aim.

SCOPE OF STUDY

The report contains:

• Examination of trend lines, potential drift cycles and relationship formulae between the high-tech and semiconductor industries
• Analysis of new technology innovations in end-use markets
• Analysis of geographic trends
• Analysis of recent developments and current trends in the market in six major applications: computing, communications, consumer electronics, automotive, medical and office equipment, and industrial and military electronics with forecasts through 2009
• Identification of significant drivers of revenue growth in specific product categories
• A discussion of the competitive aspects of each segment, along with successful suppliers’ strategies in the market
• Profiles of a selection of the leading embedded vendors.

METHODOLOGY

Research for this report was conducted via a number of data channels. The primary sources of information were: Internet searches and industry association data: and (ii) interviews conducted with chip component suppliers, custom engineering companies, and manufacturers of representative applications. In addition, other secondary sources were consulted for the report, including reviews of industry journals and publications, product literature, white papers and technical journals, and financial reports for industry suppliers. Internal sources included earlier reports from BCC on advanced electronic materials technologies.

Noteworthy here is to elucidate the approach used to deduce growth projections for the embedded market, especially considering its relationship to the overall high-tech electronics and semiconductor industry. The methodology was as follows:

• First, we tabulated annual revenue numbers for the overall high-technology industry, the semiconductor , and for chip-categories for the past 15 years (1988-2003). The goal was to determine trend lines, potential drift cycles, and, most importantly, relationship formulae between the industries. Using the historical data, we were able to decipher a relationship equation between chip component segment revenues and the high-tech industry revenues.
• Next we assessed extraneous factors, such as 
  • Economy (for example the slowdown over the past few years). 
  • Vacillation in market demand — downturn in telecom and rise in auto, for example. 
  • New technology innovation in end-use markets (signifying greater feature demands on the chip features arena). A popular example was the pervading Internet phenomenon. 
  • Geographical trends ¾ the rise of Asia-Pac as a major consumer, for example.

These key pointers were factored into the original relationship equation to get a more realistic and customized growth rate trend, especially catering to the varying demand and growth projected for different end-use applications within the embedded software, hardware and boards landscape.

From an applications perspective, the embedded market forecast is based on the estimated demand in six major applications ¾ Computing, Communications, Consumer Electronics, Automotive, Medical and Office Equipment, and Industrial and Military Electronics. Application demand was aligned with corresponding demand for chip component categories.

ABOUT THE AUTHOR

Ravi Krishnan has over eleven years of extensive professional and research experience in high technology with a special focus on the semiconductor industry. His work experience in this regard includes research analyst and subject-matter expert roles at market research firms, Cahners In-Stat Group and Integrated Circuit Engineering Corp. in Scottsdale AZ, and as a High-tech Strategy Consultant for PricewaterhouseCoopers Consulting. Currently, Ravi is with the Cognizant Technology Solutions in a technology strategy capacity.

Ravi has an MBA and a graduate degree in Mass Communications, both from the Arizona State University, and an undergraduate degree in technology from the Birla Institute of Technology & Science, India.