Direct Tv Box

The digital direct broadcast satellite (DBS) television set-top box market is currently the largest of the set-top box markets, partly because digital DBS has been around since the early 1990s, which is longer than the others. There are several reasons why this market will continue to grow at a healthy pace. New digital DBS service platforms will be launched in regions that are currently not served by television broadcasting, like India. Analog platforms are being converted to digital with more to come. The two analog platforms in Japan will convert to digital in December 2000. PrimeStar's former customers will need new set-top boxes as they convert into DirecTV subscribers. There is also a substantial number of customers who upgrade their box or who purchase a second box for their home. In regions such as North America, upgrade boxes or second boxes will account for more set-top box sales than new initial boxes. All these factors add up to millions of set-top boxes shipped to new customers each year.

New technology in set-top boxes will continue to encourage subscribers to upgrade. Digital DBS set-top boxes with IEEE 1394 and hard disk drives for video recording have been introduced in 1999. In North America, subscribers need a new box to receive the HDTV programs that are now being broadcast via satellite. Additionally, when Congress changes the law later this year, DBS service providers will offer local channels to subscribers via satellite. New set-top boxes will be needed for this service as well.

In 1998, digital DBS service providers continued to grow their subscriber base. BSkyB, one of the largest analog service providers, began converting subscribers to its digital platform, which is fueling growth in 1999. Overall, shipments of digital DBS set-top boxes reached 10 million units in 1998. Cahners In-Stat Group expects a compound annual growth rate of 27 percent through 2003.

Despite the new technology, the bill of materials value of digital DBS set-top boxes will decline. The main reason is the integration of functions into fewer semiconductors. For the near term, Cahners In-Stat Group expects the front-end and the back-end functions to remain on separate chips. The primary reasoning behind this is chip manufacturers want to be able to offer their back-end solutions for all forms of digital television, satellite, cable, and terrestrial.

However, in the long term, the digital DBS set-top box market will grow to more than 20 million units shipped each year. With volumes this large, it will make sense to integrate the QPSK demodulator function, which is now part of the front end, into the back-end chip. This will create a silicon solution specific to digital DBS set-top boxes. It will also enable a further reduction in the bill of materials.

We expect the bill of materials for digital DBS receiver set-top boxes to be less than $75 in 2003. The semiconductor content of the box will be approximately half of the bill of materials. Those advanced boxes that offer interactive features will have a much higher bill of materials. More memory, a graphics processor, a modem, and a standalone microprocessor will result in a higher semiconductor content amount for advanced boxes.

The aforementioned semiconductor content and the growth in digital DBS set-top box shipments will enable a semiconductor revenue opportunity of $1.6 billion in 2003. This will continue to outpace the digital cable and digital terrestrial set-top box markets. Therefore, it is far too large an opportunity to miss.

Michelle Abraham is a senior analyst in the Converging Markets and Technologies Group at Cahners In-Stat Group.

COPYRIGHT 1999 Cahners Publishing Company
COPYRIGHT 2000 Gale Group

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