China-based manufacturers of cellphones and tablets in 2012 more than doubled their share of purchases of microelectromechanical systems (MEMS) motion sensors, reflecting the rising prominence of the companies in the global market, according to an IHS iSuppli MEMS Topical Report from information and analytics provider IHS (NYSE: IHS).
Chinese makers as a whole were the third major user last year of motion sensors for cellphones and tablets, accounting for 15 percent of the market, up from 7 percent in 2011, as presented in the attached figure.
“The purchasers fell into two groups: the first typified by big companies such as ZTE, Huawei Technologies, Lenovo and Coolpad; and the second made up of a multitude of smaller players,” said Jérémie Bouchaud, director and senior principal analyst for MEMS & sensors at IHS. “The two groups will evolve in different directions in the years ahead. The larger manufacturers will maintain their growth through 2016, but the boom that smaller players are enjoying at present—driven by the long-tail growth of smartphones—is a bubble that will not be sustainable. As top-tier suppliers start to optimize their lower-end platforms for this market, the window of growth for smaller players will shrink accordingly, expiring during the next few years.”
Shades of gray
Chinese firms ZTE and Huawei Technologies were at No. 8 and No. 9 last year—below top players Apple and Samsung, Nokia of Finland at No. 3, LG Electronics of South Korea in fourth place, HTC of Taiwan in fifth, Japan’s Sony in sixth and Illinois-based Motorola in seventh. However, ZTE and Huawei were ahead of No. 10 BlackBerry, the rebranded Canadian player formerly known as Research In Motion.
Outside of the legitimate Chinese market, the China gray-handset space also had a small presence in the global motion sensor industry given spending of $12.7 million, down from a peak of $41.1 million in 2009. The market here consisted solely of accelerometers supplied by American companies Memsic and Freescale, as well as STMicrolectronics and Bosch. There are no compasses or gyroscopes in this segment.
Apple and Samsung dominate
Apple and Samsung Electronics were the two largest buyers in 2012 of MEMS motion sensors for handsets and tablets with nearly three-fifths control of the total market last year, affording the two giants extraordinary leverage when negotiating prices.
Apple spent $422.4 million for a 31 percent share, while Samsung’s expenditure of $340.8 million gave it a 25 percent share. The combined share of 56 percent from the two—equivalent to $763.2 million—dwarfed the rest of the market, which included the underground gray-handset space in China, as well as other smaller buyers from Taiwan and the United States, as shown in the attached table.
“The heft and influence of Apple and Samsung in the consumption of motion sensors give the two titans incredible purchasing power in this key area,” Bouchaud said. “Apple and Samsung were leagues ahead of other companies like Nokia, LG Electronics, HTC, Sony and Motorola in purchasing motion sensors. Both companies in 2012 paid 20 to 25 percent lower prices than other buyers for all motion sensors on average. For 3-axis gyroscopes, Apple and Samsung paid prices that were 10 to 15 percent less than for everyone else.”
Apple and Samsung are expected to maintain their dominance until at least 2016, retaining approximately 55 percent of the market by then.
Overall, revenue last year for MEMS motion sensors used in handsets and tablets amounted to $1.34 billion, up a solid 21 percent from $1.11 billion in 2011.
Apple’s major contribution
California-based Apple was the biggest buyer of motion sensors for tablets, but fell behind top purchaser Samsung last year for the sensors in mobile handsets. Apple’s share last year was down from 36 percent in 2011, but the company can claim important milestones in the MEMS motion sensor market.
The first iPhone made the accelerometer popular as the phone could automatically orient to a horizontal or vertical position; the iPhone 3GS launched an electronic compass for navigation; and the iPhone 4 along with the first iPad created a new market for motion-sensitive gyroscopes.
Unlike most manufacturers, Apple so far has a single-source policy for motion sensors. French-Italian entity STMicroelectronics has been the sole supplier to Apple of accelerometers since 2007 and of gyroscopes since 2010, while Japanese-based AKM has been the lone supplier of the e-compass since 2009.
STMicroelectronics is also the supplier of 3-axis gyroscopes for the iPhone 4, 4S and 5, as well as for the iPad 2, 3 and mini tablets.
Apple, however, may be facing stiff competition from other buyers in pioneering new motion sensor applications. Samsung, for instance, is driving the adoption of pressure sensors for sophisticated indoor navigation, while Nokia and HTC have already introduced optical image stabilization to reduce camera shake in smartphones.
Samsung’s upstart challenge to Apple
Samsung overtook Nokia in 2011 to become the second-largest buyer of MEMS motion sensors for handsets and tablets. The South Korean behemoth increased purchasing by 69 percent, boosting its market share to a quarter of the total from 19 percent in 2011. Samsung’s new-found prominence puts it within 6 percentage points of Apple, narrowing Apple’s lead down from 15 percent in 2011.
Unlike Apple, Samsung has a diversified supplier base: three for discrete accelerometers; four for e-compasses; two suppliers for discrete gyroscopes; two for pressure sensors; two for 6-axis inertial measurement units combining a 3-axis accelerometer and a 3-axis gyroscope; and one for 6-axis compasses comprising a 3-axis accelerometer and a 3-axis e-compass.
STMicroelectronics was the main supplier to Samsung as it was for Apple, with German maker Bosch Sensortec and California-based InvenSense as Samsung’s next biggest providers.
Samsung’s inclusion of pressure sensors in the latest Galaxy Note 2 and S III smartphones is also notable, giving the company an important head start in this segment, especially as Apple is not expected to include pressure sensors in the iPhone until 2014.
Four suppliers shipped more than $100 million worth of MEMS motion sensors last year, making up 84 percent of the market. STMicroelectronics was No. 1 with $640 million, followed by AKM with $236 million, Bosch Sensortec with $135 million and InvenSense with $121 million.