This may sound like a paradox but is entirely logical. Replacement of older technology with digital electronics, and new compelling products offering portability, delivery, and connectivity between humans and information, is driving analog momentum, as each time a dollar's worth of digital is used in an application, systems typically also require supporting analog technology that can be worth 1.4 times as much.

Since 1995, average selling prices for digital ICs have been slipping by an average of 6 percent annually. This has the effect of increasing the analog proportion of the total semiconductor business. The analog share of the total semiconductor market is expected to grow to over 18 percent during the next five years; up from 15 percent in 1991.

Demand for analog circuits increases as digital electronics proliferates. Electronics requires analog circuits to manage power, condition signaling, and to interface with the equipment people use to connect to each other and to the growing abundance of available media.

Awareness of the analog market is also growing. In the past, investor pundits have disregarded analog as 'old' and single-purpose technology, with little differentiation among suppliers, while focusing on the digital IC suppliers that offered integrated "progressive" products. Over time, this has changed, as high-performance analog suppliers have increasingly produced products that are highly integrated, repackaged, and reengineered to meet today's intensive application requirements. Further, traditional digital IC suppliers have moved aggressively into the analog space, with new offerings in mixed-signal and special purpose devices, leading to renewed interest from long time digital IC market followers on Wall Street.

In the computer market, new form factors of the functional PC are continuing to evolve with ever increasing requirements for power and connectivity, leading to growth opportunities for voltage regulators and communications devices, such as IEEE 802.11 specification components. Computer applications contribute the largest portion of revenue to the analog power management market.

In 2002, there was an estimated $1.1 billion of analog power components in this segment consisting of regulator shipments used in PCs, laptops, servers and peripherals.

Communications applications continue to advance in wireless and broadband transmission. For analog, this means growing opportunity in special purpose analog as well as high-speed standard products, including amplifiers, interface, and mixed-signal. High-speed amplifiers are the fastest growing segment of the amplifier market, thanks to the broadband upsurge. Unit shipments for high-speed amplifiers are expected to increase from 95 million units in 2002 to 310 million units by 2008. The broadband segment accounts for 41 percent of high-speed amplifier shipments. Growth drivers in the communications segment include high-speed infrastructure for wireless, VoIP, Gigabit Ethernet, 10-Gbit Ethernet, and personal broadband access equipment.

In the consumer space, rapid adoption of high-performance audio and video offerings continues at pace. Digital cameras, and DVD video and audio products, remain 'hot' sellers, barely resembling other sectors of the consumer segment. High-performance analog products targeting the consumer space include special purpose audio ICs, video ICs, and mass storage control circuits, supported by an emerging technology trend of disk drive and re-writable digital media usage in consumer electronics.

Following a substantial downturn, and a labored drawn-out recovery, it is easy to indulge a pessimistic outlook on opportunities moving forward, but it is unlikely that these recent events will undermine the fundamentals that are driving growth in analog. The catalyst that is driving consumption in this segment is not temporary, nor is it restricted to one sector of the economy, and it supports the expansion of the analog market, which is expected to outperform the total digital IC market by an average of several percentage points of growth each year.