It has been a while since the MEMS industry grew peacefully. Whether it is a surging demand for a specific end-system integrating MEMS devices, a downturn in an entire end-market, or even disturbances in the supply itself, the MEMS industry has been significantly exposed to “bigger than itself” drivers. And the next five years are not expected to be any different. The 2023 update of Yole Intelligence’s best-selling “Status of the MEMS Industry” report forecasts a US$20 billion market by 2028, with profound transformations influencing the market demand and ecosystem development.
Market outlook – what should we expect in the short term?
MEMS devices are part of everyday life, found in a variety of systems from smartphones to cars to fighter jets. Thanks to this diversity of applications, the demand for MEMS is balanced between high-volume & low-priced devices in the Consumer and Automotive end markets, and low-volume & high-value devices in the Industrial, Medical, Telecom, and Defense & Aerospace end markets. Most of the volume goes to consumer end-products and cars – two industries greatly affected by macroeconomics: COVID-19, chip shortages, geopolitics, inventory unbalances… The overall result of all these individual disruptions needs to be analyzed to see where the MEMS industry is heading in the short term.
Back in 2020, the MEMS industry was mildly affected by the COVID-19 pandemic. Indeed, the lower sales for specific end systems were largely offset by the astonishing demand for wearables – which became increasingly popular at that time – and laptops for home offices. These trends drove the demand for more MEMS microphones, inertial sensors, pressure sensors, and RF MEMS. By the end of 2021, the MEMS industry was facing an over-demand compared to the available supply.
But the tables turned in the first half of 2022 with the Russia & Ukraine war leading to an inflation crisis in Western countries. The economic uncertainty and lower purchasing power reduced the global demand for smartphones, tablets, headphones, and so on. Moreover, the economic uncertainty brought about by the war and geopolitical tensions between the US and China led to a lack of visibility of end system demand, price acceptance, and the availability of components. Hence, in addition to the chip shortage, semiconductor devices and, in turn, MEMS devices continued to be over-ordered for security through a bullwhip effect. This led to high inventory levels in the entire supply chain.
As a result, 2022 and 2023 were years of over-supply compared to the actual demand. So, what should come next in 2024?
In terms of demand, a moderate recovery in the consumer end-market can be expected. As inflation has been tamed in the US and Europe, consumer confidence should improve, which in turn should improve the sales of end products. Although the sales for smartphone MEMS may remain relatively flat in the coming years – mainly due to a lack of new use cases – other end-systems are expected to drive sales. Indeed, at Yole Intelligence, we expect TWS earbuds and wireless headphones to continue generating demand for MEMS microphones and inertial sensors. Functionalities such as Active Noise Cancelling (ANC), enhanced phone calls using beamforming and bone conduction sensors, and even 3D Audio are expected to diffuse to mid and low-end models.
Yole Intelligence’s analysts are also still expecting some interest in Augmented & Virtual Reality headsets, with new products full of MEMS and sensors being released every quarter (Apple Vision Pro should be commercialized in Q1 2024).
On the Automotive side, although the demand for cars is relatively flat, the industry is going through a massive transformation, mainly driven by the electrification of cars and autonomous driving. ADAS and safety applications will require MEMS motion sensors for GNSS positioning, MEMS micromirrors in new LiDAR systems, microbolometers for AEB, etc. Electrification of cars will also bring new opportunities for MEMS devices in applications such as thermal runaway detection, where pressure and gas sensors can be used. Finally, we also expect to see increasing interest in in-cabin comfort, which will generate opportunities for MEMS microphones, environmental sensors, ultrasonic solid-state buttons, etc.
2024 should be a year of recovery for the MEMS industry.
The crisis polarized the ecosystem
In these last few years, only a limited number of companies managed to maintain stable revenue in the declining MEMS market. The rest of the MEMS ecosystem, unfortunately, was impacted by the declining cycle. To better understand why, it is essential to understand two key market and technology dynamics.
When the worldwide economy is in pain, people with the lowest income tend to suffer the most from an eroding purchasing power, which then affects the way they spend their income. Hence, the number of mid to low-end smartphones, TWS, laptops, etc, tends to decrease more rapidly than the high-end and premium products. This is the first dynamic, a polarization at the end-system level.
The second dynamic is the strategic advantage of historical leaders. As it takes significant effort in both investment and time to develop MEMS technologies, historical leaders tend to have an advantage in terms of performance. These leaders are then preferred to supply high-end & premium end-systems, as high-end devices are essential for specific premium functionalities. For instance, Bosch is the leader in the MEMS industry and is the main supplier of all of Apple’s inertial sensors. The same is true for STMicroelectronics and Samsung’s flagship phones. It does not mean these historical players have no design wins in lower-end products, but it means they have a more diversified customer portfolio and, therefore, more stable revenue.
This explains why historical leaders in the MEMS industry have maintained their position lately and why new entrants and companies focusing on supplying high volumes of lower-grade devices have suffered. These crises tend to widen the gap between leaders and the rest of the market, thus slowing the general rhythm of innovation.
What will happen to the ecosystem when demand returns in 2024 and beyond? The industry should return to a more stable situation with historical leaders investing heavily to innovate and find business adjacencies and upside potential – MEMS microspeakers, micromirrors, environmental sensors, MEMS timing, etc.
New entrants will need to redirect a larger percentage of their income to R&D to improve the performance of their MEMS devices. Slowly but surely, these players will increase their presence in the MEMS industry. We should expect more “Goermicro & Knowles” types of stories in the coming years, whether it is for pressure sensors, inertial sensors, thermopiles, or something new.
The cards have been reshuffled lately in the MEMS industry; we cannot wait to see how MEMS makers will play them next year!
About the authors:
Pierre Delbos is a Technology & Market Analyst, Sensing and Actuating, in the Photonics & Sensing division at Yole Intelligence, part of the Yole Group. He is involved in the development of technology and market reports covering MEMS & sensing technologies, including magnetic sensors, optical and audio MEMS, as well as gas and particle sensors. He also collaborates with his team on custom studies for the key players in the MEMS industry. Pierre holds a master’s in Microelectronics and Photonics Engineering from Grenoble Institute of Technology, PHELMA (France).
Pierre-Marie Visse is a Technology and Market analyst at Yole Intelligence, part of Yole Group, working with the Photonics and Sensing division. He is a member of Yole Intelligence’s Sensing and Actuating team and contributes daily to the technical, marketing, and strategic analysis of various MEMS and sensing technologies. Prior to Yole, Pierre-Marie served as an R&D project manager at eLichens, specializing in the detection of environmental gases, for 2.5 years. His primary focus was the development of gas sensors and IoT for gas detection. Previously, Pierre-Marie worked at TDK-Tronics for more than ten years as an inertial MEMS designer for custom sensors, accelerometers, and gyroscopes. He then worked as an R&D project manager for the navigation, industrial, and watchmaking industries. Pierre-Marie graduated from ESIEE-Engineering (France) in 2010, specializing in microsystems.
Clyde Midelet, Ph.D., is a Technology & Market Analyst in the Photonics & Sensing division at Yole Intelligence, part of the Yole Group. Clyde contributes daily to technology and market analyses and the production of relevant reports. He is also involved in custom consulting projects at Yole Group. His expertise covers various areas, such as microfluidics, sensing, and MedTech, and combinations of these topics. After completing his master’s in solid-state chemistry at Rennes University in France, Clyde pursued a Ph.D. at the Ecole Normale Supérieure de Rennes in collaboration with the SATIE laboratory in France. During his research experiences in microfluidics, which led to various scientific papers, he developed a system for the electrical manipulation of gold nanoparticles for biosensing in vitro diagnostics. Additionally, he worked on an industrial project related to next-generation displays using quantum dot technology.
Status of the MEMS Industry 2023 report, Yole Intelligence