Within five years, the number of digital homes will match or surpass the number of homes with computer networks today.
The semiconductor industry is experiencing another downturn. Even though it will be relatively mild, lasting only into the second half of 2005, the usual pessimistic themes will be trotted out, namely that the semiconductor industry has run out of steam; there are no big new applications to drive future growth. Once again, these predictions will be wrong. The digital home will generate numerous new applications driving semiconductor sales growth.
The semiconductor industry is creating the digital home. Following Moore's Law, the number of transistors possible on a chip kept doubling, leading to powerful digital microprocessors. Inexpensive analog-to-digital and digital-to-analog converters were developed. As a result, almost any analog signal can be converted into a digital signal, processed in the digital domain, and then converted back into an analog signal.
CD players were a harbinger. Music was digitized, processed, stored in a digital format on a CD and then converted back into an analog signal to be amplified and become music again. The audiophiles screamed that the sound wasn't as pure as it was when LPs were played on a high-end analog system. The rest of us decided that music from a CD was better, especially minus the hisses, pops, and amplified scratches from LPs played on our own stereo systems.
Cell phones, MP3 players, HDTVs and digital cameras followed. When these were analog devices, each had different analog communications standards and could not be networked with any of the others. As digital devices, their signals became a string of digits that could potentially be read by any other digital device. This led to the possibility of a digital home where all electronics devices can share data.
The digital home is a home in which audio, video, and data devices are networked together and connected to the outside. Within five years, the number of digital homes will match or surpass the number of homes with computer networks today. The markets for existing digital home products such as digital cameras, HDTVs, and MP3 players; for new digital home products such as portable media centers; and for digital home networking product such as media PCs and media hubs will grow at rates ranging from 20% to well over 50% annually. These digital home markets will be the new semiconductor industry drivers.
Figure 1: Computer, communications, computer end-use markets
Due to the growth in the digital home market, the consumer and communications end-use markets will increase as a percentage of total worldwide semiconductor sales, as shown in Figure 1. As a result, the percentage of sales in the computer end-use market will decline; but this will not hinder semiconductor sales growth. Worldwide semiconductor sales will soon return to growth rates above 20% annually. The pessimists will be wrong again.
Morry Marshall is vice president of strategic technologies at Semico Research Corp. You can reach him at.