Personal media player chip revenues peak

Despite a doubling in the market for MP3 and personal media players (PMPs), the revenue for chip makers will actually fall, according to new report by market researchers iSuppli.
Global PMP/MP3 player unit shipments will rise to 268.6 million units in 2011, expanding at a Compound Annual Growth Rate (CAGR) of 13 percent from 128.7 million units in 2005, iSuppli predicts. In 2007, player shipments are expected to rise to 216.9 million units, up 21.8 percent from 178.1 million in 2006.
But prices will fall, with lower growth in revenues. Global PMP/MP3 factory revenue will rise to $21.5bn by 2011, expanding at a CAGR of 7.4 percent from $14bn in 2005.
It's even worse for the chip makers, as revenue will actually fall over that time, even though volumes go through the roof.
At the heart of every PMP/MP3 player is system-on-chip (SoC) controller, supplied by companies like SigmaTel, nVidia and Actions. Despite the increase in player shipments, strong price erosion will result in a decline in controller revenues from a peak of $749 million this year to $526 million in 2011. This is the result of increased competition from a growing and diverse number of suppliers including large, broad-line suppliers like Texas Instruments and Freescale, fabless Taiwan perennials like Sunplus and ALi and newcomer startups like Rockchip, Anyka, and Chipnuts.

"A major driving factor behind this growth is the fact that PMP/MP3 players take advantage of the Internet more than other consumer electronic devices, giving users the ability to quickly and easily sample, acquire and share media,” said Chris Crotty, senior analyst for consumer electronics at iSuppli. “Other reasons for the rapid market expansion include the expanding catalog of available content and component cost reductions that are making the players more affordable for consumers.”

In parallel with the rise in PMP/MP3 shipments is the expansion of the market for paid digital content used on these and other platforms. The worldwide broadband digital paid video market will expand to $4.5bn in 2010, up from just $300m in 2006. Meanwhile, iSuppli forecasts the broadband music market will grow to $5bn in revenue by 2010, up from $1.6bn in 2006. Still, some challenges remain for PMPs/MP3 players, including longer replacement cycles due to removable memory and stronger competition from media-capable mobile phones.