Embedded computing market projected to grow, but challenges remain

IHS Markit's projects that the embedded computing market, currently valued at an estimated $2.54 billion in 2015, will grow for the next 5 years at a compound annual growth rate (CAGR) of 3.7%, but ATCA revenues have declined.
By Brian Arbuckle, IHS Markit January 21, 2017

IHS Markit's projects that the embedded computing market, currently valued at an estimated $2.54 billion in 2015, will grow for the next 5 years at a compound annual growth rate (CAGR) of 3.7%, but ATCA revenues have declined. Courtesy: IHS MarkitIHS Markit’s findings on the world merchant market for embedded computing valuing it at an estimated $2.54 billion in 2015 and a forecast growth for the next 5 years of 3.7% compound annual growth rate (CAGR). While growth in the embedded computing market varies markedly by the different standards or form-factors, there is an overall trend towards smaller form-factors aimed at the Internet of Things (IoT) market which has the potential to create a large and growing demand for devices using the latest microprocessor technologies.

The greatest challenge for the traditional embedded boards market lies in the growing end-user appetite for software-centric solutions rather than hardware-based solutions on which the embedded boards market depends. In 2014 and 2015, the popularity of software defined networking (SDN) and network functions virtualization (NFV) transformed the commercial communications sector. According to the latest research from the IHS Markit Embedded Computer Boards, Modules and Systems Annual Service, world revenues for xTCA boards in 2015 fell by 13% from 2014, while xTCA systems revenue fell by 29%. IHS Markit believes that software technologies are likely to have a negative impact on the xTCA board and systems markets for the foreseeable future. IHS forecast a CAGR of -11% for xTCA boards from 2015-2020 and a CAGR of -16% for xTCA systems.

Sales in 2017 typically depend on design wins made in 2014 and 2015 and grow at different rates for different form-factors because of varying sector exposure. Commercial communication projects, for example, have typically become "run rate" business faster than defense, civil aerospace or railway projects. System-level technologies typically reach run rate business faster than board-level business.

For system-level ATCA, for example, 2014 was a reasonable year for design wins. However, vendors report that the outcome of these wins has not materialized into the production runs originally forecast. In some cases, system vendors would offer both ATCA-based and software-based products simultaneously and the latter outsold ATCA systems by far. As a result, ATCA vendors may have to transition away from a focus on hardware and telecom platforms to a more software-centric one, for example, by investing in new product lines to enable the transition to SDN/NFV environments.

Brian Arbuckle is a senior analyst for IHS Markit. IHS Markit is a CFE Media content partner. Edited by Chris Vavra, production editor, CFE Media, cvavra@cfemedia.com.

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