Abstract
The dc-dc converter module market has been subject to a number of factors over
the past couple of years that have brought down Darnell' s projections for
dollar sales between 2006 and 2011. In our previous edition of this report
(2005), the worldwide dollar market for dc-dc converter modules was expected
to be approximately $3.6 billion in 2006. In this edition, that number has
been lowered to approximately $3.2 billion in 2006. This is a 12.5% drop, and
it is due to several business and economic factors in the dc-dc converter
market. These factors differ, depending on whether you' re looking at the brick
market or the nonisolated market.
Unit sales for dc-dc converter modules have been flat, and we reduced our
previous 2006 worldwide forecast by 2% for the current report (from 104.3
million to 102.0 million units). So the 12.5% revenue drop cannot be explained
by declining unit sales. What we could not have predicted was that Delta
Electronics has grown about 40% a year for two consecutive years. Delta has
been increasing market share in the dc-dc converter market, and its Power
Systems Business Group II has grown from about 9% to 16% of its business. In
the higher-wattage brick segments (not including bus converters), downward
pressure has pushed prices well below the $0.28/W reported in our 2005 report.
Delta is bringing its competitive, ac-dc power supply pricing model to the
dc-dc converter module world. Mergers such as Emerson and Artesyn will simply
reinforce these pricing pressures.
Further affecting the revenue landscape is the maturity of the Intermediate
Bus Architecture (IBA). Although this technology once drove sales of dc-dc
converters, IBA adoption has flattened out as a result of normal market
dynamics. Since any continued adoption of the IBA will not be large enough to
ramp up dc-dc converter sales on its own, business trends will have to be the
primary driver of the dc-dc converter industry over the next two years, which
will result in a challenging market environment for makers of dc-dc converter
modules.
Turning to the nonisolated portion of the dc-dc market, competition is coming
from semiconductor makers. Power management ICs and "hybrid" products have
reached a higher-current "node" and are now encroaching on territory that had,
until recently, been the exclusive domain of modules. In particular, the >3A
ranges are where ICs are taking market share from the module makers, and the
>5A to =10A range is experiencing the greatest dynamics and growth. By
comparison, these same amperage ranges in nonisolated dc-dc converter modules
are experiencing either declining growth or slow growth. Combined, the
>5A-=10A and >10A segments will go from just 8% of the Converter/Regulator IC
market to 11% of the market between 2006 and 2011. Given this new competition,
module makers have had to trim margins in order to remain competitive.
Another important factor affecting dc-dc converter module sales is the
changing competitive environment. For years considered a fragmented industry,
with hundreds of participants competing for market share, the dc-dc converter
market is undergoing a broad consolidation. Many of the larger manufacturers
are turning to a variety of business strategies, including partnerships,
consolidations, and mergers and acquisitions in order to compete successfully
in the market. In 2005, the top 10 market share leaders combined for about 35%
of the worldwide dollar market. This year, the top ten companies make up over
44% of the market. In fact, in 2006, the top two companies, Delta Electronics
and Emerson (including new acquisition Artesyn and existing power conversion
company Astec), make up almost 17% of the worldwide dollar market, and that
number is expected to grow.
Application dynamics are also playing a key role in the evolution of the dc-dc
converter module market. For example, the Computer market is expected to
overtake Communications as the largest worldwide application by 2011. In 2006,
Communications is projected to be about 46% of dc-dc converter module unit
sales, with Computers accounting for about 44%. By 2011, Computers will
increase to 50% of the market, while Communications declines to approximately
42% of the market.
These current business factors, combined with broader economic indicators, are
expected to contribute to lower dc-dc converter revenues over the next few
years. Due to such factors as higher interest rates and the recent housing
bubble, the worldwide, five-year compound annual growth rate (CAGR) for dc-dc
converter module dollar sales was decreased from 10.5% (in the previous
report) to 8.6% (in the current report). This is supported by applications
such as servers, which have experienced eight consecutive quarters of
declining growth rates. Regionally, only North America and Asia (excluding
Japan) saw server sales growth during the second quarter of 2006, and this was
only 3.6% and 2.6%, respectively.
Dc-dc converter module makers are now facing a challenging market environment.
Despite falling prices and the concurrent decline in revenue forecasts,
however, opportunities still exist for modules. The business and technology
climates may be changing, but if power supply makers are aware of these
shifts, they can take advantage of the opportunities that such shifts present.
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