Economic downturn and inventory building have produced manufacturers in the highly competitive discrete power semiconductor market who are severely restrained by low prices and will continue to face difficulty in generating sustainable profits.

A new analysis from Frost and Sullivan, “World Discrete Power Semiconductor Markets,” reveals that revenues in this industry totaled $8.68 B in 2002 and are projected to reach $10.96 B by 2006. “Maintaining equilibrium between capacity and profitability is a strong challenge facing manufacturers in the mature discrete power semiconductor market,” notes Frost and Sullivan semiconductor research analyst Vidhia Jayakrishnan.

A fast developing and upbeat Asian market promises high growth in revenue as spiraling sales of portable and consumer electronics in this region indicate escalating consumer purchasing power. Consumers are also demonstrating a marked preference for wireless communication devices and automobiles that come equipped with enhanced functionalities. Declining prices, however, stand in the way of growing revenues. Manufacturers are exploring various strategies to counter the effect of low prices; for instance, many of the larger ones are cutting back on outsourcing costs and focusing instead on insourcing. Setting up plants in Asia, where labor, production and installation costs are lower, is another major trend seen in this market. Offering a broader product portfolio is another effective way to tackle price erosion. In fact, as consumers get more demanding about superior functionalities in wireless communication devices and automobiles, manufacturers will either have to flush out their portfolio or get left behind in the race. “Attention to these factors to a large extent aids in maintaining a modest profit in the discrete power semiconductor market,” says Jayakrishnan. Continuous improvements in some types of semiconductors such as insulated-gate bipolar transistors (IGBT) and metal-oxide semiconductor field effect transistors (MOSFET) are also stimulating the market. Demand for cost-effective IGBTs is particularly growing in applications such as switch mode power supply.