What are the most innovative electronics gadgets on the market today? Few would dispute nominees like Apple's iPhone or Nintendo's motion-sensing videogame console, the Wii.
But how many of us know that a key part of their technological edge comes from micro-electrical mechanical systems, or MEMS? In the case of these two motion sensing gadgets, tiny silicon-etched MEMS accelerometers detect motion and changes in orientation, allowing the iPhone users, for example, to rotate images or Web pages 90 degrees when the phone is turned on its side.
This is just the beginning. Soon programmers will take full advantage iPhone's triple-axis MEMS accelerometers to make impressive new motion sensing uses for iPhone, including videogames. Nintendo's (other-otc: NTDOY - news - people ) Wii videogame system also uses MEMS. And "Guitar Hero III" players can thank MEMS for boosting their score when they raise the neck of a guitar-shaped videogame controller toward the living room ceiling.
Conceptually, MEMS straddle the threshold between the mechanical and digital worlds, converting physical forces into digital information, and fabricated with the same silicon-etch process used to make integrated circuit chips. Instead of transistors, the process yields tiny, micromachined structures. Package these structures with digital circuits, and you have a MEMS chip, which can become an accelerometer, resonator, gyroscope, switch pressure sensor, filter or even a microphone.
Until about three years ago, the only places to find MEMS at work were in automotive airbag systems, industrial process controls, inkjet printers and projectors and displays. These areas, particularly inkjet printer heads, should continue to generate most revenue for the MEMS market in the near future.
In fact, Hewlett-Packard (nyse: HPQ - news - people ), with $850 million in annual MEMS revenues from its inkjet printer head business, supplanted Texas Instruments (nyse: TXN - news - people ) as the top MEMS manufacturer last year, according to French market research firm Yole Développement. Texas Instruments derives its MEMS revenues largely from its digital light processor (DLP) technology, which steers and focuses light in high-resolution projectors and displays. Generally, MEMS and MEMS-based products don't contend with the same competitive pressures as semiconductors or displays, but as Texas Instruments demonstrates, they aren't immune to it, either. Texas Instrument's MEMS revenue dropped 10% from 2006 to 2007, according to Yole, as DLP chips have come under heavy pricing pressure in the past year.
"The handset market is over a billion mobile phones today, and adoption is still in the low single-digits there," said Mark Martin, general manager and vice president of Micromachined Products at Analog Devices (nyse: ADI - news - people ). "But, in a billion-unit market, even a 20% adoption rate is huge, and that's just accelerometers--nevermind MEMS microphones."
Investors waiting for MEMS start-ups to go public are more likely to see them acquired by incumbents, probably when their technology shows some proven value. The leaders will likely be the current incumbents, like Analog Devices and Freescale. Both Analog and Freescale have reportedly developed wireless crash sensors that fit into the helmets of professional football players and transmit the severity of a big hit to staff on the sidelines.
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