It is not an easy task to predict the behaviour and future of regional and global markets at the best of times. So now, in the wake of the global financial crisis, when there is deep uncertainty and concern surrounding how far reaching the effects will be, such crystal ball gazing is nigh on impossible. Initially, the banking sector has been worst hit by the global economic downturn. For the RF and microwave industry, the key question is, will a lack of consumer confidence, restrictions on borrowing, lack of investment, etc., impact on manufacturing, production and technological development?
Without putting faith in Tarot Cards, divine guidance or mystical powers, that question is impossible to answer with any conviction. However, on recent evidence and current statistics, the Asia-Pacific region seems best placed to ride out the storm and remain an area of growth and keen adopter of new technology.
This is pure speculation, of course, and a barometer of the region’s RF and microwave market will be the 2008 Asia-Pacific Microwave Conference (APMC 2008), being held from 16 to 20 December in Hong Kong, with the conference moving to Macau for the final day. Intended as an opportunity to showcase the region’s technological innovation and activity and a platform for interaction and networking, the show will also provide a window on the market’s mood and provide an indication of its future intent.
Hong Kong is the perfect place to compare and contrast the achievements of the 20th century with the potential of the 21st, as it spent 156 years as a British colony before being returned to Chinese rule. Its handover in 1997 coincided with China beginning to emerge from a manufacturing base of low cost products to a major global player. With its voracious appetite for materials and products, China has driven an economic boom in the Asia-Pacific region.
Fuelled by the launch of mobile phones and the development of wireless interconnect systems, the country has progressed from a technological novice to a major contributor and consumer. Initially the emphasis was on producing low cost, labour intensive product and the low-end OEM and mid-range ODM processes. However, newly produced standards in China for TD-SCMA mobile phones and wide-area access Internet coverage are generating higher end development.
The choice of Hong Kong as the host of APMC 2008 demonstrates its perception as China’s gateway to the West. However, in reality, is that gateway truly open to the outside world or is there still a closed door policy restricting competition and free trade? Further afield, can India satisfy the increasing demand for the technical skills necessary to feed its growth? And will the established economies in the Asia-Pacific region be able to develop and implement innovative technologies and fend off competition from emerging nations?
This article addresses these questions by considering the economic, commercial and technological environment in which the Asian RF and microwave industry is currently operating. It is not intended to be a comprehensive market overview, but attempts to present a window on the current status of academic and industrial development and identify the main trends influencing it. It also provides a commercial perspective as executives from a small cross section of companies actively participating in the Asian RF and microwave industry contribute to the ‘company survey’.
Mobile Telecommunications
As has been mentioned, it is difficult in the current climate to make market predictions and this report makes every effort to use the latest statistics and quote renowned sources. For example, the International Telecommunications Union (ITU) Secretary-General, Hamadoun Touré, stated that worldwide mobile cellular subscribers are likely to reach the four billion mark before the end of 2008, which is a continuation of impressive statistics that saw year-on-year growth averaging 24 percent between 2000 and 2008. While in 2000, mobile penetration stood at 12 percent, it surpassed the 50 percent mark in early 2008 and the ITU estimates it will reach about 61 percent by the end of 2008.
However, the statistics are skewed by some regions, mainly in Western Europe, approaching saturation allied to the relatively slow world economy, while the BRIC economies of Brazil, Russia, India and China are experiencing significant growth as more people gain access to their first mobile phone, which is often also their first phone of any kind.
In the Asia-Pacific region ITU figures show that China surpassed the 600 million mark by mid-2008, representing by far the world’s largest mobile market. By the end of July 2008, India had around 296 million mobile subscribers, which is a penetration rate of about 20 percent, thus offering great potential for growth especially if the existing high levels of competition between mobile operators are sustained, thus keeping prices down.
In the Asia-Pacific region, like in all markets, the early adoption of mobile/wireless has been in the cities and conurbations with the densest population and where investment in infrastructure is lucrative. Regulatory constraints are a concern in some sectors and to ensure continued growth network operators are considering the expansion of their networks to cater for increased traffic and to take advantage of the market potential for delivering services to rural areas. Rural areas bring their own challenges of price sensitivity and logistics. However, with affordable entry level handsets, realistic pricing and backing from governments and foreign investors, it is likely to be a lucrative market.
Further up the value chain the market for the GPS phone remains small, with fairly low penetration. However, its growth rate is significant in China, primarily due to the fact that a number of chipset manufacturers are integrating GPS functionality into the mobile phone’s main chipset, aiding handset manufacturers and driving the market penetration of GPS.
Broadband
ITU figures show that, in terms of broadband access, the Asia-Pacific region has progressed impressively over the past few years, with subscriber numbers growing almost five-fold in five years: from 27 million at the beginning of 2003 to 133 million at the start of 2008. As such the region is the world’s largest broadband market with a 39 percent share of the global total at the end of 2007.
In the region’s high-income economies, this growth is being fuelled through competition to provide faster fixed broadband access. Operators in Hong Kong and Japan having launched 1 Gbps broadband and triple-play services for the residential market, featuring applications such as Internet telephony and television. South Korea is also at the forefront and leads the world in terms of the percentage of households with fixed broadband access.
However, the gap in available broadband speeds between rich and poor countries is as wide as the Great Wall of China is long. For instance, in the three countries previously mentioned (Japan, Hong Kong and South Korea), the minimum advertised broadband speed is faster than the maximum broadband speed in Cambodia, Tonga, Laos and Bangladesh.
In Malaysia the government has a mandate to increase broadband penetration. The country has a relatively high GDP per capita and high PC usage, but there is a significant digital divide between central urban conurbations and the rest of the country, along with entrenched wireline competition. Four licenses have been awarded but rollout has been delayed from the original deadline of March, 2008, with the commercial launch of a WiMAX service in Malaysia still uncertain at the time of going to press.
It is the established economies that lead the way in terms of 3G mobile cellular deployment. They profit from the fact that fixed and mobile broadband technologies complement each other and users can enjoy continuous high-speed Internet access. However, 3G is beginning to be considered for many emerging markets where it will be important to keep handset prices low. In the lower-end economies, Indonesia and Sri Lanka are early 3G adopters but have yet to see significant success, while highly populous nations like China, India and Pakistan are yet to migrate to 3G.
Commercially, though, these countries are the key battlegrounds with great potential. India in particular, with its large subscriber base, licensing plans for three metropolitan and up to five rural area 3G licenses and a vast resource of local content developers looks a prime candidate for 3G implementation.
The latest study of 3G in Emerging Markets, from the Strategy Analytics’ Emerging Markets Communications Strategies service, concludes that 3G will meet a pressing need for voice and some data services in under-served markets. In order to establish a critical mass of acceptance, however, operators will need to offer affordability in what are generally price sensitive markets.
Semiconductors/ICs
According to the spring 2008 forecast of the World Semiconductor Trade Statistics (WSTS), the global semiconductor market is expected to grow 4.7 percent on an annual basis to $267.7 B in 2008 with projected growth increasing from 3.2 percent growth in 2007. Mobile communications, PCs, digital consumer products and automotive electronics are key contributors to this growth, with a significant factor being the increased semiconductor content per item. As has been the trend over recent years, the Asia-Pacific region continues to be the fastest growing area fuelled by the continued manufacturing shift to the region and a rapidly rising domestic demand.
India’s strengths lie in semiconductor design, with In-Stat forecasting Indian design services revenue increasing from $1.4 B in 2007 to $3.4 B in 2012. Although healthy growth is forecast, the industry faces problems created by its own success, including a shortfall in the supply of design engineers and increasing salaries, together with the wider issue of the weakening of the dollar against the rupee. On the plus side, Indian design companies are building up competencies to increase the depth and breadth of their services and making acquisitions to gain complementary skills.
The power semiconductor devices market has seen significant growth in recent years as their applications have extended into a variety of electronic applications, notably communications, networking, consumer electronics and the automotive industry. These applications demand discrete power semiconductors with a small footprint, high efficiency and good integration. Suppliers are striving to enhance process technology and packaging, while more efficient manufacturing and increased capacity, together with improvements in technology have reduced prices.
The sales of discrete power semiconductors have increased significantly in recent years in the Asia-Pacific region, particularly China, South Korea and Taiwan. Technologically, the MOSFET and IGBT segments are seeing greatest expansion.
With regards to foundries, outsourcing from IDM is rising, with pure play foundries becoming increasingly important as they take the lead in developing cutting-edge technologies. There were twenty five 300 mm fabs operational in the Asia-Pacific region in 2006 with Taiwan being the leader, followed by South Korea, with Singapore likely to grow significantly due to active investment.
Electronics
In the global electronics market, the Asia-Pacific region (particularly China), Eastern Europe and leading South American countries have benefitted from being low cost manufacturing locations. In fact, a recent report published by Reed Electronics Research and distributed by In-Stat stated that between 1995 and 2006 Asia-Pacific’s share of global electronics production increased from 20 percent to 42 percent, with China’s share increasing from 3 percent to 20.5 percent during that period. In 2006 electronics production in India increased by 22 percent.
Malaysia and Singapore are not in the same league but are seeing growth, as is Vietnam, which is benefitting from favourable government policies and a strong work ethic as well as low operational and labour costs. Such conditions are attracting global EMS/ODM companies while leading OEMs like Sony, Samsung, Fujitsu and LG have set up manufacturing operations in Vietnam.
However, while the emerging countries are seeing sustained growth, others in the Asia-Pacific region have witnessed a downturn in fortunes. The migration of production to low-cost locations has particularly affected Japan. According to the Reed Electronics Research Report, by the end of 2006, the country’s electronics output had fallen by 23.5 percent from the peak in 2000 and its share of global electronics output fell 12.7 percent from 26 percent in 1995. Despite the underlying trends, production stabilised in 2006 with production rising by 4 percent and by a modest 0.6 percent in 2007.
General
With the high profile communications industry grabbing the headlines and the limelight, other sectors of the RF and microwave industry tend to get overshadowed in the Asia-Pacific region. For example, although many countries in the region invest a small proportion of their GDP in defence, the more developed nations such as Japan, South Korea, Singapore and Australia are investing more heavily. Radar for intelligence, surveillance and reconnaissance (ISR) is a case in point, with the major powers in the region making finances available for modernisation and upgrades. Figures from Frost & Sullivan show that Japan accounted for 39.8 percent of the total Asia-Pacific air ISR radar market in 2007, followed by South Korea and Australia.
Technologically, developed countries are upgrading to active electronically scanned array radar technology and investing in R&D. Also, network-centric warfare is raising its head above the parapet, with an increasing number of countries in the region shifting their military doctrines toward a networked-defence strategy. However, the high cost of these next-generation platforms with advanced radar systems is likely to restrict their adoption by small to medium sized countries.
In the commercial sector, the rapid growth of the economy of emerging nations in the Asia-Pacific region has produced significant growth in the domestic sensors market. There has been increased interest in sensors to meet the demand for high quality process control and monitoring and for their utilisation to satisfy new standards and protocols for emerging technologies such as wireless. Japan, Malaysia and Singapore have embraced the transition from traditional sensing methods, while others such as Vietnam, Thailand and Indonesia are lagging behind with implementation.
Significantly, though, foreign investors have shown an interest in funding R&D activities to develop new technologies that when combined with the improvement of existing processes can improve the performance of sensors and also deliver them at competitively low prices.
Company Surveys
Technologically and economically the above briefly sets the context in which the Asian RF and microwave industry is currently functioning, but what are the realities for companies developing, manufacturing and marketing new products in the region? To provide an insight into current market conditions and technological development, a commercial perspective is offered via the ‘company survey’ of executives from companies representing a cross section of industry—namely the host of APMC, Hong Kong, the growth economy of China and the established market of Japan. The format is generally a brief overview of the company’s activity, followed by comments on technological and market initiatives.
Hong Kong
YAN TAT
Formerly Shen Zhen Enda Electronics Co. Ltd., Enda established YAN TAT (Hong Kong) Industrial Ltd. in 1992. The company specializes in the manufacture and supply of printed circuit boards to the global electronics industry and has successfully grown into a professional organization that offers a wide range of products. These include double-sided and multi-layer PCBs on standard and exotic laminates and special base materials as well as thick copper backed PCBs (5 mm) for heat dissipation.
The applications for these products are primarily in the communications and automotive industries, with antennas, filters, connectors and power amplifiers (pre-bonded copper and post bonding) mostly used in base stations. These solutions require special materials/designs and a high level of quality.
As a result, YAN TAT does business in North America, Europe and Asia. Its approach to customers is the same the worldwide and with existing customers being global, the company has the necessary knowledge and expertise to support each geographical area. The key approach is good communication with customers and a keen understanding of their requirements, with flexibility of manufacture also being an important factor.
The company believes that, in general, Asian producers provide volume manufacturing with good quality and technical support, but also points out that there are Asian designed products that offer older, simpler, lower-end technology solutions for developing countries. On a larger scale where YAN TAT is seeing significant activity is among its bigger global communications customers that are working on cost reduction to gain market share. This is likely to be achieved through improved design and the reduction of PCB and PCBA/box build manufacturing costs.
China
Shenzhen Shennan Circuit Company
Established in 1984, SCC is a hi-tech enterprise engaged in the production of high-precision, high-density and high-reliability double-sided/multi-layer PCBs that the company manufactures to customer specifications. Its RF and microwave PCBs are manufactured primarily for communication, medical, automotive and automation applications.
The company takes its social responsibilities seriously both in terms of enterprise and the community. It continuously explores and practices ways of integrating social responsibilities into the entire management process of production and operation. The aim is to attain economic, community and environment benefits in order to create coordinated and sustained development of the business.
Shenzhen Shennan Circuit Company currently has two factories in Nanshan and Longgang, staffed by over 3000 employees. The PCBs in mass production can be up to 52 layers. When it first began, the company introduced advanced production equipment and process technologies from abroad that enabled it to become a leader in domestic industry.
Its mission is to improve product quality and manufacture according to the highest international standards. Products comply with both Chinese national standard and US IPC standards, and are UL certified. This means that SCC not only supplies China and Hong Kong, but is also an international player that markets its products in North America, Europe and Southeast Asia. The company’s long-term aim is for multiple services expansion, rolling development and deployment into new areas.
Japan
Hirai Seimitsu Kogyo
The company provides high-precision photo-etching including the fabrication of multi-layered Low Temperature Co-Fired Ceramic (LTCC) substrates, precision photo etching of various metals and polyimide. It is also a world leader in the field of metal etching. Other capabilities include the plating of metals and other surface treatment along with mechanical forming such as NC machining, laser cutting, wire EDM, welding, thermally pressurized bonding and stamp forming. Specifically, in the RF field, the company provides in-house plated LTCC substrates for RF modules and lead frames for RF and/or RF power devices. Particular effort is going into providing a design library or RF design support for the LTCC foundry service and miniaturization of LTCC substrates.
New technologies that Hirai SK is currently developing include: thin film metallization of the LTCC substrates for the higher Q at micro and mm-wave frequency bands and for finer pitch patterning, improvement of the metal paste printing, shape and materials, for the higher Q or lower resistivity at mm-waves, and microwave sintering to reduce the costs of LTCC, etc. As the reduction of size and losses are vital for any mobile equipment, including 4G mobile phones, a miniaturized and low loss BPF is currently under development in a project being carried out in association with Ryukoku University. Also significant is the company’s work on waveguide implementation in the LTCC at mm-waves.
The company’s manufacturing, development and international sales are based in Japan. The company has sales partners throughout Asia and in the US, but expects to see growth in BRIC countries and the European Union as there are few LTCC suppliers there. Geography is not viewed as a boundary as the Internet and e-mail make the exchange of technical information and layout data easy and immediate. In fact, design information and the RF design kit for the LTCC foundry service is downloadable from the company’s web site, which eliminates location problems and simplifies overseas communication.
Hirai SK has the traits of a typical Japanese company as it is good at precision handling, has high yield and quality, is traditionally good at ceramics fabrication, can carry out a large number of iterations to optimize processes and can ship samples quickly.
With regards to technology, the company sees the following stimulating the market it operates in: high frequency magnetic materials, nano-wire or nano-particles for the improvement of the Q factor at mm-wave frequencies, dielectric materials or LTCC green sheet with higher Q factor at mm-waves, direct bond technology of the LTCC and the metal plate or sheet for accurate internal patterning, and thin film metallization, artificial dielectric materials/nano technologies and frequency agile or tuneable materials.
Looking to the future, Hirai SK sees groundbreaking development being the realisation of CMOS device integrating mm-wave circuits with the memory + antenna, with integration to a small sized mm-wave antenna + FEM + digital processing/memory. Such miniaturized modules could be attached to any device such as ear-phones for TV sets. The company will also strive for higher accuracy of the LTCC process to produce higher yields at lower costs.
Conclusion
Over the last 12 months the Asia-Pacific region has, in general, continued to see consumer markets grow, fed by new technology. For the RF and microwave industry it is the mobile communications and wireless technology sectors where there has been significant growth, with China now being the world’s largest mobile market. This sector also demonstrates the contrast that this vast continent reveals: in the established high-income economies such as Japan, where the possession of mobile phones is near the saturation point, the emphasis is for greater content and added value services while emerging nations require cheap handsets, low prices and access in rural areas. With a mobile penetration rate of around 20 percent, India in particular has significant potential for growth.
The provision of broadband access is a key issue too with the launch of faster rates and triple-play services being significant in the high-income economies while the priority for the emerging economies is the implementation of services at any speed.
Asia remains at the forefront of semiconductor manufacturing and foundry services. It has benefited from migration from declining markets in other regions buoyed by an increasing local consumer market. In the foundry market, Japan, South Korea and Taiwan remain dominant, but China has seen significant investment in this sector too. India has become a key player in semiconductor design, but faces challenges to provide training and education to meet the demand for skilled technicians.
While the emphasis and focus has been on the high profile industries such as telecommunications and electronics, the more general and understated sectors of the industry have gone relatively unnoticed. However, there is growth in defence systems in general and radar systems in particular and sensors are being used in applications from industrial processes to wireless technologies.
Finally, at the time of going to press, the global economic downturn cannot be ignored and although Asia is likely to be more immune than most, it is inevitable that there will be some consequences. Those countries that could suffer are likely to be at the opposite ends of the economic spectrum. The high-income economies such as Japan, South Korea and Taiwan will be most susceptible to a cut back in consumer spending and the competition from cheaper, imported goods, while the low-end economies, which are just beginning to emerge, could be stunted by a lack of investment and consumer reluctance at a critical stage of development. However, it is hard to see the growth economies of countries such as China and India losing much momentum.
Acknowledgments
The author would like to thank the company executives who shared their in depth knowledge and expertise. Thanks also to the companies below for sharing their statistics on the market: ITU: www.itu.int; WSTS: www.wsts.org; In-Stat: www.instat.com; Frost & Sullivan: www.frost.com.
