Semiconductor Outlook:Embedded Intelligence From the Cloud to the Edge

Silicon suppliers must reinvent business model to realize the new wave of growth

Mario Morales

Program VP | Enabling Tech & Semiconductors | IDC

Agenda

Key takeaways

ICT and OT Market Context: Systems to Silicon Size

How large are the volumes at the edge? Why does it matter?

Industrial and Automotive: What problems should technology

suppliers focus on to capitalize on these two growth sectors?

Semiconductor revenue growth over the next 5 years

How must semi suppliers and OEMs identify the right markets

and ecosystem requirements to unlock value beyond silicon and

HW?

2

Deep Intimacy with

customers and partners

essential for scale

1

1 out of 4 devices

connected

(only 13% for OT

segments)

2

Most computation and

data reside at the edge-

need for edge business

strategy

3

Moore’s law and new

architectures drive

computer vision and

machine learning

4

Key Takeaways

3

IoT Semiconductor market is

less than $1 billion today

ICT and OT Market Context, 2015

ICT

Auto

OT$3.4 T

$2.0 T

$0.9T

Source: IDC Black Book, IDC Enabling

Technologies, Cap IQ, Company financial

reports, 2016

Semi Industry Revenue Growth Shifts from IT to OT

OT19%

IT81%

2015

OT27%

IT73%

2020 2015-2020

5-Year CAGR

OT: 7.6%

IT: -2.5%

Total Market: 1.5%

Source: IDC Semiconductor Application Forecaster, June 2016

IT: Computing, Consumer (except Other Consumer), Communications

OT: Automotive, Other Consumer, Industrial & Military Aero

$97.5 Billion OT Semiconductor Market by 2020

Source: Semiconductor Application Forecaster, IDC, June 2016

(1) Industrial includes Retail, Energy, Medical, LED Lighting, Military, Aero

Semiconductor Revenue by Key Market Segments, 2015-2020

6

2015-2020 CAGR

$40.7 $40.5

$33.5 $31.5

$21.7$19.1

$9.3 $9.5

2015 2020

$105.2$100.5

-0.9%2015-2020 CAGR

$3.5 $3.0

$30.8$25.1

$38.2$40.5

$20.9 $21.4

2015 2020

$93.3$90.0

-0.7%

$3.5 $4.5$8.4 $6.5

$19.4 $22.1

$14.9 $25.0

2015 2020

$46.2

$58.1

4.7%2015-2020 CAGR

$5.5 $9.0$0.8 $1.0$9.2$12.6

$13.8

$20.3

2015 2020

$29.3

$43.0

2015-2020 CAGR

8.0%

$4.9 $6.1$2.3 $1.8

$7.7 $7.8

$17.1 $21.6

2015 2020

$32.0$37.3

2015-2020 CAGR

3.1%2015-2020 CAGR

$2.1 $2.4$7.4 $4.5

$15.0 $16.6

$6.2 $6.8

2015 2020

$30.7 $30.4

-0.2%

MPU / MCU / DSP Memory Application Specific Other

Local Gateway

Wired

Local Gateway

Wired Ethernet, Cellular,

Whitespace, RF, Powerline

Big Data

Access Management

IoT ManagementCore Network IoT CommunicationGateway

Data Routing and Analysis

Identity & Access Governance

RDBMS NoSQL

Enterprise Service Bus &

BI

Edge Gateway Cloud/Data CenterNetworking

From the Edge to the Cloud: Where Does The Intelligence

Reside?

7

Primarily IoT/ Some

Intelligent SystemsPrimarily Intelligent

Systems

Edge Sensors

*95%

* % of 2016 System Volumes

1%

3%

<1%

Industrial and Automotive Sectors-What problems

should technology suppliers be looking to solve?

Uptime, cost, and asset life fundamental requirements

Large installed base

High level of service

Supply chain critical to margin sustainability for ecosystem

Computer vision, cloud-based analytics, and AI investment in need of guidance

Electrification, increasing energy demand

Autonomous-safety, regulation, compute

What’s next? Computer vision and machine

learning, make autonomous systems a reality

Computing and sensors link the physical and digital world-just at the start of the journey

Systems will begin to learn and drive natural user interfaces like our mobile and CE devices do today• natural language processing

• Image recognition, videos evolving to do the same

Ubiquitous connectivity with ultra low latency will be essential (5G)

Still a long journey toward intelligence and AI• Extending intelligence from the Cloud to personal mobile devices,

wearables, and into our home (Echo, Google Home) is just beginning it will take time in OT environment

Computer Vision Key Area for Silicon Over The

Next Five Years

Video Surveillance

Ship 98 CAGR 18%

MPU 100% MCU 0%

ADAS

Ship 196 CAGR 25%

MPU 58% MCU 42%

Industrial Robots

Ship <1 CAGR 9%

MPU 30% MCU 70%

Retail/Kiosk

Ship 6 CAGR 12%

MPU 99% MCU 1%

Smart Home Security

Ship 1,527 CAGR 13%

MPU 8% MCU 92%

Drone

Ship 83 CAGR 54%

MPU 100% MCU 0%

Sensor/System 7

Wearables

Ship 242 CAGR 26%

MPU 71% MCU 29%Industrial Automation

Ship 49 CAGR 3%

MPU 93% MCU 6%

Gaming

Ship 43 CAGR 0%

MPU 100% MCU 0%

Medical Imaging

Ship 2 CAGR 7%

MPU 96% MCU 4%

Smart Building

Ship 8 CAGR 5%

MPU 34% MCU 66%

Sensor/System 35

Note: 2020 Systems shipments are in millions of units, CAGR is for 2015-20 systems shipments.

MPU and MCU as share of governing intelligence for systems.

Note: Data from June 2016 IDC Enabling Tech Embedded & Intelligent Systems Market Model

Autonomous Driving Requiring Technology,

Compliance, and Deep Ecosystem Partnerships

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Ultrasonic

Short/Medium-range Radar

Camera

LIDAR

Long-Range Radar

Ecosystem Partnerships Necessary for Market

Development

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OEM and New Entrants

• OEMS challenged to stay ahead of new

entrants

• View technology as differentiation

• Change in development model

Tier Ones & Tech Suppliers

• Value add being challenged

• Rapid decrease in technology cost

• New technologies and business models

Semiconductor Companies

• Large players consolidating

• New entrants have good traction, but will

need scale to remain sustainable

12

Automotive Semiconductor Growth – Three Drivers

Electrification

• Lowering greenhouse emissions

• Enabling transportation paradigm shifts (car services)

• Lower operating costs

Infotainment and connectivity

• Connected Life extension

• Diagnostics / OTA Updates

• Generational expectation

Advanced Driver Assist

• Safety requirements / Governmental mandates

• Brand Differentiation

• Road to autonomy2005 2010 2015 2020

Automotive Semiconductors

Source: IDC Semiconductor Application Forecaster, June 2016

$43 Billion Semiconductor market by 2020

Suppliers Target Auto and OT Growth Areas, More

Consolidation Expected

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

-5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Mobile phones

PCs

Servers

AutomotiveIndustrial

Other Consumer

(wearables, smart home)Game Consoles Tablets

Digital TV

Set-Top Boxes

2015-2020 CAGR

Perc

enta

ge o

f S

em

iconducto

r M

ark

et

Size of bubble indicates 2015 revenue

Source: IDC WW Semiconductor Application Forecaster, June 2016

Fastest Growing Semi Suppliers-What Should

Taiwan Do?

0% 50% 100% 150%

Silicon Motion

IDT

Cavium

Sigma Designs, Inc.

Apple

Mellanox

SkyWorks

InvenSense

HiSilicon

Avago

RobertBosch GmbH

Sequans

Ambarella Inc.

Cirrus Logic

Mobileye

Synaptics

Qorvo

Cypress

MaxLinear, Inc.

Focal Tech

Top 20 Fastest Growing Semiconductor Companies- 2014-2015 (Revenue

Growth)

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Half of the semiconductor companies on this list are

focused on intelligent systems and computer vision,

smart home, wearables, autonomous systems

MCU and leading CPU companies have launched

go-to-market strategies targeting OT and Auto

OEMs and ecosystem

Contractor manufacturers and ODMs pivoting to

support new opportunities in OT and Auto

Taiwan Ecosystem needs to move from a

fast follower strategy to an enabler and

leader in the faster growing segments of

the market

Note: Data from 2016 IDC Semiconductor Application Forecaster

Contact Information

16

Mario Morales

mmorales@idc.com

+1 650.350.6498

M Morales