EL SEGUNDO, CA -- Demand for LCD TVs and Blu-ray players makes consumer electronics the hot market, but will semiconductor suppliers benefit?

Research firm iSuppli isn't so sure, saying that despite the demand, consolidation is ahead for chip vendors targeting that space.

Consumer electronics equipment sales are projected to reach $259 billion this year, then grow 6.7% and 7% in 2011 and 2012, respectively, the firm noted. Meanwhile, semiconductor sales to the sector will jump 27.7% this year to $57.2 billion, and continue to grow to $69.4 billion by 2014.

“In the wake of the economic slump, the battle among companies to supply such semiconductor chips to the makers of consumer electronic devices has escalated," said Jordan Selburn, principal analyst for consumer platforms at iSuppli. "A design win in a high-value consumer electronics product could make $100 million or more during the life of the device.”

ASSP and ASIC suppliers stand to reap the most gains, iSuppli says, but the development costs of an ASIC -- which could reach $10 million to $20 million -- limit the market to the biggest companies. Smaller companies, the firm says, face "the option of designing with an older semiconductor manufacturing technology likely to have higher production costs — or getting out of the market altogether." iSuppli also noted the "fragmented" consumer semiconductor market, in which just Toshiba has a market share greater than 10%. This suggests smaller and undercapitalized players will be priced out of the market, and "significant consolidation" will take place over the next half-decade, the firm says.

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