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Although sales of portable media chip players keep growing, the market for controller chips for these products is seeing intense price erosion as new competitors enter the fray, according to a study by iSuppli Corp.
Titled “PMP Growth Competes with Mobile Handsets, Handheld Video Players”, the study said global PMP/MP3 player unit shipments will rise to 268.6 million units in 2011, expanding at a CAGR of 13 percent from 128.7 million units in 2005, iSuppli predicts. Global PMP/MP3 factory revenue will rise to $21.5 billion by 2011, growing at a CAGR of 7.4 percent from $14 billion in 2005.
Average Selling Prices (ASPs) for PMP/MP3 controllers are relatively stable, with most suppliers opting to increase features such as capacity, display size and quality while keeping prices fairly flat. This trend has resulted in strong pricing pressure on the semiconductor suppliers.
“A few years ago, the strong growth of the PMP/MP3 player market attracted a new set of controller suppliers,” said Chris Crotty, senior analyst for consumer electronics at iSuppli, in a statement. “Seemingly overnight, companies such as China’s Actions Semiconductor Co. Ltd. and South Korea’s Telechips Inc. emerged to challenge early leaders SigmaTel Inc. and PortalPlayer (News - Alert) Inc., acquired by nVidia Corp. in 2006.”
Despite legal complications with SigmatTel as well as PortalPlayer’s historically strong relationship with Apple (News - Alert) Inc., Actions secured the top unit market share spot in 2005, Crotty added.
Crotty noted that a second wave of competitors has entered the market, including Chipnuts, Anyka and Rockchip. They are joining an increasingly crowded market that also includes perennial Taiwan-based fabless suppliers as well as broad-line chip makers like Samsung (News - Alert), Texas Instruments, NXP, Analog Devices and Freescale.
The study said that Action and other low-cost suppliers have exacerbated the existing pricing pressures for controller chips. Controller ASPs dropped by 26 percent to $3.84 in 2006, down from $5.19 in 2005. Going forward through 2011, the CAGR will remain at nearly negative 16 percent.
Meanwhile, the two competitors dominated the PMP/MP3 controller for years, PortalPlayer and SigmaTel (News - Alert), have struggled as lower-cost competitors emerged. The market shares of Portal Player and SigmaTel fell to 12 and 15% respectively in 2006, as chips from these companies have become too expensive and/or too feature rich for low-end players, the study said.
Both companies have diversified into other product areas, and PortalPlayer may seek to leverage the resources of new parent nVidia Corp, iSuppli said.
For more on the study, please visit the site.
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Spencer Chin is a contributing editor for TMCnet. To see more of his articles, please visit his columnist page.
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