Yole says slow military spending killed IR sensor sales

July 24, 2014: Yole Développement says the uncooled thermal camera market downturn in 2013 of -5% CAGR is due to the  military. “Military market downturn and high price erosion have deeply affected traditional infrared imaging margins for the past few years at both sensor and camera level,” explains Yann de Charentenay, Senior Analyst, MEMS & Sensors, Yole Développement. What is the best strategy to survive?

Low-end applications now drive overall growth, thus requiring much higher cost reduction at both material and manufacturing levels. In addition to technological developments to reduce material costs (see next paragraph), economies of scale have become a key competitive advantage. Thus, FLIR, the market leader, and many players at both sensor and camera levels try to target as many commercial markets as possible to aggregate volumes.

In order to react to the strong price pressure, Yole Développement identifies various trends depending on the business models of the companies:
- Vertically integrated players: with internal sensor manufacturing, these companies have an efficient cost structure to lead the price war happening in commercial camera markets: DRS and FLIR in the surveillance market, and FLIR and Fluke (for pyroelectric) in the thermography market.

In order to react to the strong price pressure, Yole Développement identifies various trends depending on the business models of the companies:
- Vertically integrated players: with internal sensor manufacturing, these companies have an efficient cost structure to lead the price war happening in commercial camera markets: DRS and FLIR in the surveillance market, and FLIR and Fluke (for pyroelectric) in the thermography market.

Those camera makers focus on core and camera manufacturing and have outsourced sensor manufacturing to foundries (FLIR, DRS, and Raytheon) in order to reduce the sensor cost and benefit from the wafer level techniques of the foundries. Other vertically integrated companies (BAE, L3com and Lumasense ITC) will probably follow this path in the future.

- For sensor merchant suppliers: these players are under pressure because their camera customers can not follow the price war led by vertically integrated manufacturers. In order to maintain their competitiveness in front of the semiconductor foundries used by vertical companies, they have upgraded their production line to 8’’, climbed up in the value chain by providing cores with increased integration, and they have also develop innovative MEMS technologies customized for infrared imaging.

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