Energy Efficiency Playing Role In Driving Financial Rebound Of Chip Makers

July 14, 2009 by Jeff Shepard

Traditionally, as OEMs curtail plans for new products, they also curtail purchasing chips. As a result, chip sales typically decline early in an economic downturn. Usually, when a recession comes to an end, chip manufacturers are among the first companies to come out of it. Six months ago, Investor’s Business Daily, in its tracking of industry groups, ranked semiconductor manufacturing number 117 out of the 197 groups. Most recently, chip makers had climbed to the number 5 position.

The chip manufacturing industry has traditionally focused on making its products faster, but also smaller, with an especial interest in lowering costs. However, the industry has now added "energy efficiency" to its chief manufacturing and marketing concerns. Consumers have been demanding that their portable PCs run longer than the standard four hour battery charge, so chip makers have had to respond by increasing battery life for users.

Intel introduced its tiny Atom chip, which uses only 2.5W, for netbooks and handheld wireless devices in 2008. The company is planning to release an ultra-low-voltage version later this year. Advanced Micro Devices (AMD) has its own low-power device line for netbooks called Yukon. Besides increasing battery life, lower-power devices typically save manufacturing costs, because devices run cooler and require few or no fans.

In the handheld market, Intel and cell phone maker Nokia are developing a new range of handheld devices that will require new, energy-efficient chips. Qualcomm’s Snapdragon, based on the ARM chip design, is targeted for the same market.

Industry analysts say that worldwide chip sales have increased on a month-to-month basis for the last three months. On a year-over-year basis, chip sales are still down. For May, chip sales ($16.5 billion) were 23.2% lower than May 2008. Analysts think markets such as notebooks and smart phones, as well as new devices such as netbooks, are both expected to spur market growth starting in the second half of 2009.

According to the analysis of the Darnell Group, the power management sector typically lags about three months behind the chip makers in economic upturns, thus the future is looking brighter for the power management segment of the power electronics market.