Embedded Systems: Technologies and Markets

REPORT HIGHLIGHTS

• The worldwide market for embedded technology was $101.6 billion in 2009, and was $113 billion in 2010.  The market will exhibit steady growth at a compound annual growth rate (CAGR) of 7% over the next 5 years and BCC expects the market to reach $158.6 billion by 2015.
• The embedded hardware segment represents the majority of the overall market with a $108.8 billion share in 2010. BCC expects this market to reach $152.4 billion by 2015 increasing at a CAGR of 7%.
• The software segment accounts for $4.2 billion in revenue in 2010. This segment is expected to grow at a CAGR of 7.8% and will reach $6.1 billion by 2015.

REPORT SCOPE

INTRODUCTION

STUDY GOALS AND OBJECTIVES

This market research report focuses on embedded technology, including both embedded hardware and embedded software.  The report forecasts the market for embedded technology through 2015 by considering macroeconomic factors and dynamics of the markets for various end products.  It also provides measurement and analysis of major market segments and highlights major players and emerging trends affecting the market.

This research builds upon previously a published report in 2009.  The market dynamics have changed since that time, and several new devices have emerged in the market.  “Hot” technologies in 2009 such as the MP3 player are becoming outdated and newer technologies such as smartphones and tablets are making headway into everyday life.

A new open-source operating system provided by Google, “Android,” has generated widespread interest in the worldwide community, and several companies have planned to enhance or upgrade their devices to Android at some point.

Semiconductor geometry has continued to shrink but still has not reached its physical limits just yet.  The erosion in prices of semiconductor chips has continued, but due to continued demand, the market has continued to expand.

We’ve considered all these factors in preparing the market analysis and forecast in subsequent sections.

REASONS FOR UNDERTAKING THE STUDY

The ease of developing and marketing embedded devices is increasing with the advancement of technology and communication.  Embedded devices dominate nearly every aspect of human life and will continue to do so in the future.  Many new devices are being introduced into the global market every day with innovative end applications.  From cell phones to digital TVs to tablets to refrigerators to washers, we are constantly using embedded devices for different purposes, blissfully unaware of the underlying technology.

Embedded hardware and software make these embedded devices work.  The success of the embedded devices is defined by the quality of the device’s design and development and its use of the proper underlying hardware that meets cost constraints.  This study analyzes key components of embedded devices, underlying business models and the drivers for each, the overall market size and projection, and the size and projection of major market segments. 

EMBEDDED TECHNOLOGY MARKET SEGMENTATION

Historically the term embedded systems was used to describe any non-PC-related system, but in time, the definition of the term has grown to include any system that is dedicated to a particular functionality.  This report segments the embedded market into hardware and software. 

The hardware segment consists of the following segments:

• Processor IP (Intellectual Property):  Key players include ARM and MIPS
• MPU/MCU:  Microcontrollers and microprocessors
• DSP:  Digital signal processors
• ASIC:  Application-specific integrated circuit
• FPGA:  Field processing gate arrays
• Embedded boards.

The software segment consists of:

• Operating system:  Key players include Windows CE, Vxworks
• Software development and testing tools:  This includes development tools such as Eclipse
• Middleware:  Perhaps less important but still significant—this includes things such as TCP/IP (Transmissoin Control Protocol/Internet Protocol)stack
• Open-source software and tools:  This includes Linux and Android.

REPORT SCOPE AND ORGANIZATION

The report is divided into two parts:  embedded software and embedded hardware.  For each segment of the hardware and software market, we have provided:

• Definition and further segmentation
• Overall market
• Geographic data
• Revenue by end application
• Business models
• Growth forecast and market trends
• Key players and market share.

The report also includes a high-level discussion on the embedded hardware design.

The report does not consider chips developed for a specialized market such as set-top boxes.  It also excludes IP and EDA (electronic design automation) tools used for the development of hardware. 

This report will provide:

• Understanding of the embedded devices architecture and the roles played by different hardware components
• Understanding of the market segment and factors driving its growth
• Knowledge of business models used in different market segments
• Market potential for each segment and projection for the next 5 years.

INTENDED AUDIENCE

This report is a horizontal report that touches many vertical industries.  We believe that this report will be useful to a broad reader base.  More specifically, we believe that the following categories of people should benefit: 

• Embedded industry insiders looking to enhance their business knowledge by understanding more about the market trends, including executives, managers, marketing, and salespeople
• Product marketing and management people who want to understand the intricacies of the embedded market and position their products accordingly
• Business and venture executives in the technology industry looking to invest in embedded hardware companies
• Finance and investment professionals looking to make investment decisions for embedded hardware market companies.

METHODOLOGY

Both primary and secondary research methodologies were used in preparing this study.  Market data and information for this report were obtained through numerous channels. 

• SEC filings and public data:  We researched publically available information from various companies and the industry association data.  These include SEC filings by public companies, presentations in various conferences, and articles and reports published by company insiders.
• Interviews:  We also conducted interviews with company executives and other industry experts to gather the key data and to understand their market insight.  The companies selected for this purpose fell into several categories, including software and hardware suppliers, device manufacturers, engineering services companies, etc.
• Other: In addition, the Internet was used to locate information.  This included Internet searches, blogs, and articles written by industry journalists.  Editors and executives provided individual perspectives on the market.  We also reviewed industry journals and publications, white papers, and technical notes.  Internal sources included earlier reports from BCC Research on embedded systems technology.

In building a forecast for future growth, we considered macroeconomic factors along with market segment trends and its correlation to overall industry.  In particular, the following factors were considered.

• Annual revenue of the overall industry throughout the period of the last 5 years; we used this data to determine trends and correlation between the overall industry and each segment
• External factors such as the economy and growth projections by key institutions, including  the IMF (International Monetary Fund)
• Key drivers for each the market segment, such as the emergence of tablets and consumer devices
• Geographical trends impacting the technology, such as the rise of Asia as a major consumer base
• New innovations and threats incurred by them to the existing technology.

ANALYST CREDENTIALS

Anand Joshi has more than 15 years of experience in the consumer electronics industry as well as the embedded and semiconductor industries.  As an industry executive, he has often been involved in developing market strategies, market projections, and modeling.  He brings his extensive industry expertise and knowledge to the development of this report.  Mr. Joshi authored the prior version of this report.

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DISCLAIMER

This publication provides informative material of a professional nature.  It does not constitute managerial, legal, or accounting advice, nor should it serve as a corporate policy guide or an endorsement of any given product or company.  This information is intended to be as accurate as possible at the time it was written and was undertaken on a best-effort basis.  The views expressed are those of the author and do not make any warranty, express or implied, for the accuracy, completeness, or usefulness of the information, or for the interpretation of data or its use by others.  Projections involve risks and uncertainties that include but are not limited to technical risks associated with technology development, government regulatory approvals, and access to capital.  The author assumes no responsibility for any losses or damages that may result from one’s reliance on this material.

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