MPEG video chip market: overall it will grow - In-Stat/Insights - Moving Picture Experts Group - Brief Article - Statistical Data Included

Electronic News, August 12, 2002 by Michelle Abraham

ALTHOUGH THERE ARE OTHER MEANS OF compressing video, the Motion Picture Experts Group (MPEG) specifications are the most widely used standards for compressing, transmitting and then decompressing digital motion video and audio signals for traditional video delivery. Today, there are three MPEG video standards in use, MPEG-1, MPEG-2 and MPEG-4. The popularity of MPEG compression gave rise to a MPEG video chip market with more than $1 billion in revenue in 2001. Unit shipments were over 100 million for the second year in a row.

While many of the companies in this market are well established, there have been newcomers, either starting from the ground up or via acquisition. Cirrus Logic purchased LuxSonor, which had MPEG-1 and MPEG-2 decoder solutions, and Stream Machine, which had MPEG-2 encoder solutions, to add video to its home entertainment products. Others have purchased companies to fill missing pieces in their portfolio. Conexant's recent acquisition of GlobespanVirata's video compression business is an example. Now Conexant will have MPEG-2 encoding technology to go with its MPEG-2 decoder solutions.

In 2001 the top place was split as STMicroelectronics claimed the No. 1 spot in revenue share with 33 percent of the market. ESS was first in unit shipments with 31 percent unit share. LSI Logic was second in both categories, with the rest of the competitors far behind.

Overall, the MPEG video chip market will continue to grow over the next several years, as digital video proliferates. Segments of the market, however, are in different stages of the life cycle.

In MPEG Encoders and Codecs, MPEG-1 encoders have never been a large market. MPEG-2 Encoders and Codecs can be divided into those used in professional and broadcast equipment and those used in consumer products such as PVRs and DVD recorders. The professional and broadcast equipment MPEG-2 market is a small market served by a few companies. On the other hand, the consumer market for MPEG-2 encoders and codecs was less than a million units in 2001, but it will have a few years of triple digital growth, bringing it to more than 30 million units in 2006.

In the decoder arena, shipments of MPEG-1 decoders, which are primarily used in VCD players, have finally slowed down. MPEG-2 decoders used in SVCD players will disappear from the market in the next few years. There is no end in sight for DVD players, so the same goes for DVD MPEG-2 decoders. Set-top boxes continue to grow so MPEG-2 decoders for this segment will increase albeit not as quickly as DVD. The MPEG-2 Decoder market for HDTV is similar to consumer MPEG-2 encoders as it is small today, but the growth potential is great.

MPEG-4 decoders and codecs have enormous growth potential as video is added to cell phones. However, it is unclear how much of this market will be hardware vs. software based.

In 2006, In-Stat/MDR expects total shipments of MPEG video chips to reach 272 million units and $3 billion in revenue. The markets on the way up will more than make up for those on the way down. Over the long term, unit growth will outpace revenue growth. More and more functions are being added in with the MPEG video circuits, especially in products for consumer markets, but chip prices continue to decline.

Michelle Abraham is a senior analyst at In-Stat/MDR. She can be reached at mabraham@instat.com. In-Stat/MDR is owned by Reed Business Information, the parent company of Electronic News.