As the rate of growth for smartphone sales slow, questions arise regarding the impact that slower growth will have throughout the semiconductor supply chain. Over the past decade, the 1 billion-plus smartphone market has driven the need for more advanced manufacturing process technologies, new input materials and the need for more fab capacity. It has even legitimized new players into the supply chain.
Does a slower growth rate mean a change is on the horizon? What portion of the growth is due to semiconductor content versus smartphone unit growth? Semico looked at the change in smartphone silicon content over the past 10 years and the impact on wafer demand.
Although there were smartphones well before the Apple iPhone, it was the iPhone, introduced in 2007, that set the smartphone on the path to the mass adoption that we see today. Between 2005 and 2010, smartphone sales grew at a compound annual growth rate of over 50%. In addition, over that time period, silicon content in a high-end phone doubled. The amount of silicon necessary to produce all the smartphones worldwide has grown from less than 1% of total wafers in 2005 up to over 18% of wafers this year.
In 2014, Semico changed the breakout of smartphones from basic, feature, and high-end to basic/feature, low-end smartphone and high-end smartphone. The primary differentiator of a smartphone is the Internet access and the operating system capabilities. In terms of the Bill of Materials, the low-end smartphone has fewer chips, lower density memory and the processor is lower performance (i.e. manufactured on more mature technology).
In 2015, unit sales of low-end smartphones were still lower than high-end smartphones, but the rate of growth was much higher. In addition, the low-end smartphone is looking more like the high-end phone in terms of silicon content. When the smartphone first entered the scene, the high-end phone contained over 37% more chips than a feature phone.
But the smartphone market is showing signs of maturing. The rate of growth is slowing. One of the beliefs associated with slowing markets is that slower unit growth can be compensated for with higher semiconductor content growth. The silicon content in a high-end smartphone has grown 11.4% CAGR over the past 10 years, while the semiconductor content in a low-end smartphone has grown 14.5% over the same time period. Even as the semiconductor content grows in the high-end smartphone, the low-end smartphone is looking more and more like the high-end phone with over 80% of the same chips as the high-end phone.
In terms of where the silicon content is growing, over the past five years, MEMS and sensors account for the largest growth. Smartphones started with an accelerometer/yaw sensor, a proximity sensor, a MEMS microphone and possibly a few other sensors. Today a high-end smartphone has more than 12 MEMS/sensors. The number and type of sensors also has prompted the addition of a sensor hub to process all the information that is being collected.
Two other functions that have seen significant changes in silicon growth are the CMOS image sensor and memory. Not only has the cellphone camera grown from just one camera to two or more, the resolution of the camera has improved causing the area associated with the camera to increase. Finally, both the DRAM and Flash memory content has increased significantly. The Samsung Galaxy touts 3GB DRAM memory while the Apple 6s offers 2GB. That is more than double the density in a 2010 phone and over quadruple the content in 2005.
Even with the addition of all these functions and improved performance, the slower growth in smartphone unit sales will have an impact on the growth in wafer demand. After growing at a CAGR of almost 50% over the past five years, in 2016 wafer demand for smartphones will only grow by 15%. The industry will have to find another device like the smartphone to propel wafer demand to the next level.