From Subscriber to Silicon: Why end-to-end technology value chain insight is critical to your supply chain survival

September 2012

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Today’s Speakers

Research Director, Digital Media
408 654 1707


From Subscriber to Silicon
Why End-to-End Technology Value Chain Insight
is Critical to Your Supply Chain Survival

408 654 1707

Why?


Because…

Image Sensor
 140%
Overall Semiconductor
 112%


Understanding…


Meanwhile…

Contract
Manufacturers
Display Device
Providers Software

Independent Wireless
Design Houses Infrastructure
and Providers
IP Licensing

Wireless
Silicon Communications Device
Providers OEMs
Value Chain
~ $1 Trillion

Service
Consumers Providers
(Operators)

Network
Retailers Maintenance
and
Content
Software
Providers


Example…

Technology

• Raw Materials
• Semiconductors
• Memory
• Displays
• Manufacturing
• Channels
• Applications

• Gaming • Operators
• Video • Wireless
Media • Cinema • Wired Telecommunications
• TV • Infrastructure
• Advertising • Computing
• Broadband Media • Telematics
• Mobile Media • Consumer


From Subscriber to Silicon
Why End-to-End Technology Value Chain
Insight is Critical to Your Supply Chain Survival

408 654 1707

The Consumer Electronics Value Chain is
Large and Complex

$280B
$50B Contract
Manufacturers
Display Device
Providers Software

Independent $360B
Design Houses Device
& IP Licensing OEMs

Consumer
$62B CE Semi Electronics $200B
Suppliers / Pay TV Service
Manufacturers Value Chain Providers
~ $1 Trillion

Service
Consumers Providers
(Operators)

Online TV,
Retailers Pay per view
Service
Content providers
Distributors $5B

The story of an interconnected supply chain

The capabilities of the components drive consumer demand

Components Vendor Retailer/operator Consumer/subscriber

Revenue flows all the way back from subscribers to silicon

Copyright © 2011 IHS Inc. All Rights Reserved.

As an example let’s look at what happens to
the TV sets market in Europe

European TV sales and installed base
70 700

60 600

Installed base (m)
50 500

40 400

30 300

20 200

10 100

0 0

TV sets sales TV sets installed base


European TV sets sales and installed base
are starting to flatten after years of growth

Inflection point
European TV sales and installed base
70 700

60 600

Installed base (m)
50 500

40 400

30 300

20 200

10 100

0 0

TV sets sales TV sets installed base


But what actually happened during this
period was an increase in sets installed

TV homes and TV sets across major countries and regions
600

500
Homes / installed base (m)

400

300

200

100

0
US Europe Western France Germany Italy Spain UK Eastern
Europe Europe
TV HHs TV sets


Where were these new sets being installed?
In new rooms, this is really driven by FPD

Shipments driving sets per home
60 3.0

50 2.5
Beginning of growth
Shipments (m)

40 2.0

30 1.5 CRT
FPD
20 1.0 Sets per home

10 0.5

0 0.0


This has increased the number of homes
with more than one TV set

Multi-set homes
100%
90%
80%
70%
60%
50% US
40% Europe
30% Western Europe

20%
10%
0%


Now we’re starting to reach a natural limit to
TV set growth: no more rooms for TVs

Multi-set TVs profiled into homes 2011
600 3.5

500 3.0
Installed base (m)

2.5

TVs per home
400
2.0
300
1.5
200
1.0

100 0.5

0 0.0
US Europe Western France Germany Italy Spain UK Eastern
Europe Europe
TVs in multi-set HHs TVs in single-set HHs TVs per multi-set HH


And this slowdown is happening globally,
but not uniformly across regions

TV set shipments by region
300

250
China
India
Shipments (m)

200
Russia
Brazil
150
Asia-Pacific
Latin America
100
North America
Middle-East & Africa
50
Eastern Europe

0 Western Europe


And there are some noticeable bubbles,
including 2005-2010 globally

5-year growth bubbles in TV set sales
140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%

2000-2005 2005-2010 2010-2015


So, our forecasts for TV set shipments take
into account all of these complex factors

TV sets shipments in Europe
80
70
60
Units (m)

50
40
30
20
10
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

In fact, we can see the drivers of component
revenue in the TV set shipment volumes

TV shipments against key component revenue
25 300
Revenue ($bn)

250

Shipments (m)
20
200
15
150
10
100
5 50

0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Memory MCU Display Driver Logic ASSP/SoC
Analog/Power LEDs Other TV set shipments


And more explicitly in the volumes of key
advanced technologies which have really
driven demand for advanced components

Advanced TV technologies against component revenue

25 300
Revenue ($bn)

250

Shipments (m)
20
200
15
150
10
100
5 50

0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Key component revenues HD (incl. FHD) 3D Digital tuner Smart TV


TV sets are only one ecosystem, others,
such as set-top boxes also obey the same
rules back up the supply chain
North America, Europe 2011: TVs accessed by pay-TV

Total TV sets
(935m)

Pay-TV STBs
(323m)
High-end STBs
(149m)


So we might ask ourselves what is driving
the growth and flattening of the pay TV set-
top box market

Global digital pay TV set-top box market
180 14
160 12
140

Revenue ($bn)
Shipments (m)

10
120
100 8
80 6
60
4
40
20 2

0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Cable Satellite IPTV Revenue


There is a superficial correlation between
pay TV subscribers and set-top shipments

Global subscribers against set-top box shipments
700 160

600 140

Shipments (m)
120
500
Subscribers (m)

100
400
80
300
60
200
40
100 20
0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Digital pay TV subscriptions Digital pay TV set-top box shipments


However it is much more complex, driven by
installed base breakages, subscriber churn
and subscriber net additions

Set-top box drivers: US data (m)
250

200

150

100

50

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Set-top box shipments Set-top box installed base
Total pay TV subscribers Net subscriber additions


The growth opportunity for set-tops is partly
driven by the number of TVs not currently
with a set-top

North America, Europe: TVs accessed by pay-TV set-top
boxes
700 100%
90%
600

percent accessed (%)
Devices installed (m)

80%
500 70%
400 60%
50%
300 40%
200 30%
20%
100
10%
0 0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
TVs accessed by digital pay-TV STB TV sets installed Percent accessed


But there is also a big future driver from IP-
capable (hybrid) gateway and client boxes

Connectable pay TV STB shipments by STB type
80
70
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

IPTV STB DTH Hybrid STB DTH STB-Gateway
DTH Thin Client Cable Hybrid STB Cable STB-Gateway


Which is driven by increased global
broadband penetration

Broadband penetration of households (%) South Korea
Hong Kong
100
UK
90 France
USA
80
Germany
70 Japan
Australia
60 Italy

50 Spain
Czech Republic
40 Argentina

30 Turkey
Russia
20 Poland

10 China
Brazil
0 South Africa
2000 2005 2010 2015


However, broadband connectivity has also
had a impact on consumer behaviour

Digital Video
closed network
Internet


The result is a fragmentation of devices in
consumers’ homes

North America, Western Europe: percentage of devices
installed
100%
Percentage of devices installed (%)

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005 2010 2015
Tablets Connectable PMPs Connectable consoles Smartphone handsets
PCs Connectable TV sets Connectable BD


At a household level, TV sets are now
inundated with companion devices

North America vs. Western Europe: devices per TV household
10
9
8
Devices per TV HH

7
6
5
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
North America: TV sets per TV HH
Western Europe: TV sets per TV HH
North America: IP connectable handsets, tablets, PMPs, consoles, PCs, TV sets, and BD players per TV HH
Western Europe: IP connectable handsets, tablets, PMPs, consoles, PCs, TV sets, and BD players per TV HH


Pay-TV investment has fragmented away
from large volume relatively complex STBs

Simple set-tops Complex set-tops Multi-device

Requirement To access To affirm a control Reactive against
additional TV sets point in the home changing consumer
behaviour
Example DTA in the US Multimedia Home Applications on
Gateways PCs, phones &
tablets

34


Creating severe revenue pressures on
major set-top suppliers

Global STB revenue by vendor
12
Others
10
Cisco+SA
Revenue (€b)

8

6 Motorola

4 Pace+Philips
2 Technicolor+Hughes
0

STB revenues (€m) STB average selling price (€)
Vendor 2000 2010 CAGR Vendor 2000 2010 CAGR

Cisco + SA 1,139 1,158 0.2% Cisco + SA 327 103 -10.9%

Motorola 1,686 1,814 0.7% Motorola 281 95 -10.2%

Pace + Philips 1,339 1,365 0.2% Pace + Philips 275 66 -13.3%

Technicolor + 2,116 930 -7.9% Technicolor + 230 72 -11.0%
Hughes Hughes
Total Market 8,005 10,998 3.2% Total Market 264 76 -11.7%


And each device type is driven by the same
logic of revenue from consumer spending…

Western Europe 2011: consumer leisure spend
2%
Pay-TV VoD
12% Pay-TV subscriptions
Games
Mobile Games
10% Mobile Video
2% Mobile Music
2% On-line video
On-line music
6% 54%
Physical music
Physical rental
1%
10% BD disc rental
DVD retail
Cinema


…advertising revenue…

Western Europe 2011: advertising revenue
1% 1%
7%
Television
11% 29% Internet
Radio
Newspaper
Magazine
24% Out-of-home
Cinema
22% Mobile
5%


…and ultimately device purchases

Consumer electronics device purchases: 2011

13%
5%
3%
Blue ray players
Blue ray recorders
26%
Televisions
Game consoles
24% Set-top boxes
Media Tablets
Digital Media Adaptors
11%
18%


Thank You!

408 654 1707

Robust…


IHS Electronics & Media…

PARTS , PROCUREMENT, AND SUPPLY CHAIN RISK MANAGEMENT

VERTICAL RESEARCH PLATFORMS

Consumer Electronics, Media, Electronic and Industrial
and Telecommunications Technology

Display Materials and Systems

HORIZONTAL
RESEARCH
Teardown Analysis
PLATFORMS

Connectivity, Electronics Manufacturing, and Semiconductors


IHS Electronics & Media…

• Access to over 1,200 data transformation analysts and researchers, over
350 sector analysts and industry experts, and tens of millions of data
points
• Proprietary datasets, forecasts, perspectives, and market analysis
• Primary and secondary research methods
• Data modeling
• Regional and country-level granularity
• Pricing, cost modeling, and teardown analysis for thousands of devices
and products
• Automotive, consumer, industrial, and medical electronics as well
digital content creation / distribution market data and analysis
• Value chain assessments including: end-market reporting and
commentary; hardware, component, and services market share analysis;
supply & demand dynamics; spending; electronics design and
manufacturing; as well as production trends and capacities


Questions & Answers

408 654 1707


For More Information
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