March 23, 2007 - Boosted by refreshed inventories and demand for power transistors, sales of discrete semiconductor devices grew faster than IC sales in 2006 for the first time in nearly two decades, and only the second time since the 1970s, according to data from IC Insights Inc.

Total discrete sales rose 8.8% in 2006 to $16.59 billion, tweaking past the firm's 8.8% estimate for IC industry growth during the year, and following on the heels of a 3% slump in discrete sales in 2005. IC Insights projects discrete sales growth will again keep up with IC sales this year -- ~7% to $17.7 billion, marking a new record high in dollars since the previous peak level in 2000, vs. 7.2% growth for ICs based on forecasts cast in January.

With ICs becoming more powerful at lower costs, and integrating more transistors on a single chip (particularly for small-signal devices), there is less demand for discretes which are often used as "glue" devices for interfaces and signal conditioning between ICs on boards, explained Rob Lineback, analyst with IC Insights, in an email exchange with WaferNEWS. "Integrated circuits continue to eat away at discretes, integrating more transistors on a single chip. This is especially true for small-signal devices, such as simple transistor products," he wrote. Also, ASPs for discretes continue to drop, while next-gen ICs with more functionality can be priced higher depending on market conditions.

Discrete sales dipped 3% in 2005, compared to increases of 8% in ICs and 7% in overall semiconductors, due to a 2% drop in discrete unit shipments vs. an 11% rise in IC units, Lineback noted. The last time discretes dollar growth surpassed IC growth was 1990, when the semiconductor industry was coming off a down-cycle trough between boom periods, and system makers pulled back IC orders and replenished discrete inventories. The same situation happened in the first half of 2006, Lineback explained -- system manufacturers increased orders for discretes to refresh depleted inventories for transistor products, diodes, rectifiers, and other commodity discretes.

Notable growth segments within the discrete sector include power transistors (e.g. MOSFETs and IGBTs), due to various market trends, "including higher speed MPUs which require lower operating voltages for battery operation and lower power consumption in portable systems but higher current levels for gigahertz frequencies," Lineback noted, adding that emphasis on more efficient power supplies is also creating demand for new power transistors. Automotive applications are an important market for power transistors, he noted -- IGBTs are an important component in both hybrid gas/electric vehicles as well as standard gasoline cars, and high-voltage MOSFETs are increasingly being used in automotive electronics.

Another high-growth area is rectifiers and thyristors (a four-layer semiconductor device consisting of alternating P- and N-type materials), mainly in industrial applications, home appliances, and lighting applications, as developing countries build out their infrastructures and consumers buy more electronics, he pointed out.

Power transistors, which accounted for about half of all discrete sales in 2006 ($8.4 billion), are in higher demand for applications in battery-based portable systems and high-speed PCs, the firm noted. Segments of the power transistor market expected to see significant growth in 2006 include insulated-gate bipolar transistors (IGBTs, +19%) and power MOSFETs (+11%).

Most of the top 10 discrete suppliers held their positions in 2006, led by Toshiba ($1.37 billion), STMicroelectronics ($1.33 billion), and Infineon ($1.26 billion). Toshiba's discrete sales rose just 1%, and just $38 million separates Toshiba and ST as the world's top discrete supplier (they were $185 million apart in 2005).

In terms of growth, Infineon (27%) paced the pack due to a focus on power discretes and commercialization of next-generation silicon-carbide (SiC) Schottky diodes and other discretes. ST (14%) also is emphasizing a broad range of discretes, including GaN Schottky diodes in a partnership with Velox Semiconductor (a spin-off from EMCORE), and is riding the strong growth in IGBTs as well, Lineback pointed out. Renesas, which ranked third in 2005, fell to 11th place in 2006 with discrete sales of $681 million (-32%), as it de-emphasizes discretes.

While growth in discretes sales is keeping pace with IC sales over the past year, longer-term growth for the segment is still trailing overall ICs. IC Insights pegs the 2006-2011 compound annual growth rate (CAGR) for discretes at just 6%, topping out at $21.9 billion in 2011, while ICs will achieve a CAGR of 10% during the same period, reaching $344.2 billion by 2011. Discrete production is growing faster in China, Taiwan, and elsewhere in the Asia-Pacific region where 100-150-200mm fabs are being used to make transistors, diodes, and other commodity devices at low cost, Lineback noted.

Top 10 discrete suppliers, 2006

(Sales in US $M)

Company.........................2005 sales..........2006 sales..........% change

Toshiba..................................1354.............1371......................1%
ST...........................................1169.............1333......................14%
Infineon...................................994...............1263....................27%
Fairchild...................................892...............950.......................7%
Rohm.......................................847...............880.......................4%
Vishay......................................808...............860.......................6%
NXP/Philips.............................780...............815.......................4%
ON Semi..................................626...............750......................20%
IR..............................................679...............740.......................9%
NEC..........................................680...............720.......................6%
Others....................................6038..............6904......................14%
TOTAL DISCRETES..........15,244..........16,586....................9%

Source: IC Insights Inc.