Cleantech: What It Means for Semiconductors

Sanjay Krishnan, Business Manager, High-performance Analog Group, Maxim Integrated Products

Cleantech is a catch-all term that encompasses many different technologies, some of which are semiconductor-related. It is considered by many to be the driver of demand for semiconductor products in the coming years. This article examines the role played by semiconductor components in clean energy applications, from photovoltaic cells to smart meters. The technology and business implications of advances in semiconductor technology on cleantech and its impact on the semiconductor market itself are also analyzed.

First, let's look at some of the areas that comprise cleantech and their potential for semiconductor content. The cleantech sectors that garnered investment in 2009 can be broken into two categories:

• High potential for semiconductor growth: solar, automotive and transportation, lighting, green information technology (IT), energy efficiency and smart grid.
• Low potential for semiconductor growth: green buildings, nuclear, biofuels, gasification, cleaner coal, batteries, energy storage, green materials, wind, tidal, geothermal, water and carbon markets.

Table 1. Cleantech Investment in 2009

Potential for Semiconductor Growth	Approximate 2009 Investment
High	$3.52 Billion
Low	$2.77 Billion

Table 1 shows that a significant and greater amount of capital was invested in cleantech areas that could potentially generate profit for the semiconductor industry in the future. Notably, the solar industry saw the largest amount of funding in 2009, raising about $1.8 billion.

Solar

Almost all forms of energy are derived eventually from the sun. Solar photovoltaic (PV) cells or other methods that harness this energy are the most direct method to convert the incident electromagnetic energy to electricity. With silicon being the most widely known and used material for these cells, it has become the mainstay of the solar industry, using 33 percent of the world's electronic grade silicon produced in 2006. However, the PV industry accounted for only 5 percent of semiconductor industry revenues, and even less in terms of profits, conveying a very different cost structure than the traditional semiconductor industry. The technology, products and end customers of solar PV also differ from the IT-oriented semiconductor industry. For these reasons, the solar industry is treated separately from the semiconductor industry, although there are some companies (notably Applied Materials and Cypress Semiconductor) that have invested in both.

IT and Cleantech

The cleantech sectors that are of most interest to the semiconductor industry are those that use IT in improving energy efficiency. They include smart grid, automotive and transportation, lighting and energy-efficient appliances. As seen in Table 2, these markets drew large investments in 2009.

Table 2. Cleantech Sectors That Use IT in Improving Energy Efficiency

Sector	2009 Investment
Automotive and Transportation	$845 Million
Lighting	$188 Million
Energy Efficiency, Demand Response, Smart Grid	$522 Million

Automotive and Transportation

Improving the efficiency of traditional petroleum-powered transportation hasn't been of great importance until recently. Ford's Model T of 1908, which averaged 25 miles per gallon (mpg), was more fuel efficient than the 20.8 mpg average for all cars and trucks in the U.S. in 2008. Great strides have been made in safety, speed and comfort, but they have resulted in the electrical system becoming the heaviest part of the modern car after the engine and the transmission system. Today, modern auto companies are looking for ways of improving basic fuel efficiency through fuel cells, hybrid gasoline-electric and other technologies. They are also improving safety and comfort through utilizing hundreds of sensors that replace heavy electrical and mechanical equipment or a hydrocarbon-propelled visit to the mechanic.

Transportation infrastructure has also seen investment in its electronic tolls and monitoring, which will form the basis for additional investment in IT to use the information for economically useful purposes. Examples such as dynamic ride-sharing and routing around traffic congestion have been made possible by the hardware and software that enable mobile access of real-time data.

Semiconductor content in automobiles and transportation infrastructure will continue to rapidly grow in the foreseeable future.

Lighting

Lighting is another 19th-century technology that has seen recent improvements in its efficiency and quality. Light-emitting diodes (LEDs) are continuing to improve in efficiency and, as a result, are replacing incandescent bulbs in many applications. Finer control of color and intensity have made LED-based lighting useful for applications, from handheld devices to large-screen TVs used in sports stadiums and concert venues. Each of these devices requires semiconductor components to control the lighting, therefore increasing the demand for chips that improve the intelligence and efficiency of LEDs. Established semiconductor players already have LED lighting solutions; however, constant improvements in the underlying technology for producing various colors have kept up the demand for newer chips to drive and control them. Advances in semiconductor materials for producing higher efficiency lighting will play an important role in the future of the lighting industry.

Energy Efficiency, Demand Response and Smart Grid

Thanks to the climate change movement, the vast industry that generates and distributes electricity has been undergoing a revolution in recent years. This has brought to light the ageing infrastructure and alternative strategies for improving peak capacity, generation and distribution efficiencies. Technologies that make the distribution grid smarter have attracted the most attention and funding in recent years. Smart grids promise to add intelligence to the electric power distribution grid and, consequently, improve its efficiency in the way IT has improved office productivity. Semiconductors naturally play an important role in this endeavor, with companies offering solutions that incorporate hardware, software and services which enable appliances, cars, houses and offices to communicate, making the entire grid more efficient.

The standards and methods used to achieve this are unsettled, but any viable solution will involve silicon transistors being used in communication networks. The standards that are likely to emerge will be from among the candidates that provide a proven solution, such as existing wireless telecom standards. Chipsets for these are relatively cheap and do not represent a new direction for technology. The higher semiconductor content in appliances will be dominated by integrated systems-on-chip (SOCs) that can handle several wireless communication protocols.

The utility industry tends to favor proven technologies due to reliability concerns and will choose technologies that are well tested in operating environments. This means that the measurement and networking technologies will be built upon existing hardware and software designs. Consequently, competition will drive down the system and component costs, making it of smaller incremental profitability to chip companies than the scale of anticipated rollouts suggest.

Conclusion

This article has examined the areas that fall under the term cleantech and considered the impact semiconductors will have on these areas. Many of these areas do not need fundamental advances in semiconductor technology to become viable, but require an economic reason strong enough to overcome established methods. The cleantech industry is in the process of consolidating, and the emerging players will be in a position to define the standards for the future. Semiconductors at the heart of IT solutions in cleantech will play a significant role in this sector. Automotive, transportation and lighting will need technological advances and creative solutions from the chip industry. Smart grids will drive semiconductor revenues upward, but are not likely to generate new advances in chip technology or launch new and profitable chip companies.

About the Author

Sanjay Krishnan is the U.S. chair of GSA's Analog/Mixed-Signal Interest Group. He is a business manager in the high-performance analog group at Maxim Integrated Products (NASDAQ: MXIM). Since 1998, he has worked at semiconductor and design automation companies in engineering and business roles and has advised technology start-ups. He can be reached at sanjay_krishnan@mba.berkeley.edu or 408-530-6600.

Back to Articles Home