As sales prices continue to drop, microcontroller companies are exploring new strategies to achieve economies of scale. These small but powerful chips are increasingly being used to handle a wide range of complex computing tasks, evolving from single-chip solutions to more integrated devices. Microcontrollers (MCUs) serve as the central processing units in various interconnected devices, playing a key role in the development of the Internet of Things (IoT). Without MCUs, the success of IoT would be significantly harder to achieve.
Figure 1: MCU demand is growing healthily, but overall market revenue growth is much slower. From Semico Research.
Despite their widespread use, this popularity comes at a cost. While the market for MCUs continues to expand, average selling prices have dropped sharply. The number of units needed to recover development costs has increased, making it challenging for some companies to remain profitable without significant changes in their business models.
Figure 2: The biggest growth in the MCU industry in the report comes from consolidation. From IC Insights.
There are three main types of microcontrollers: 8-bit, 16-bit, and 32-bit. Although 4-bit MCUs are still in use, many customers are migrating to 8-bit or planning to do so. The 16-bit MCU is becoming the next mainstream option, although it is more expensive. However, the rapid decline in 32-bit MCU prices has pushed many customers to move directly to 32-bit solutions instead of upgrading to 16-bit.
Rob Lineback, senior market research analyst at IC Insights, stated, “This year, the average selling price (ASP) of 32-bit MCUs fell by 15%. We expect a 7% annual decrease (CAGR). For 16-bit, the CAGR is -2%, and for 8/4-bit, it’s also -2%. In the future, 32-bit MCUs could potentially sell for less than 16-bit ones. This is driven by competition and pricing pressure, with the IoT playing a major role.â€
Joanne Itow, general manager of manufacturing at Semico Research, added, “Besides DRAM and NAND, ASPs in all logic chip markets are not performing well. The only big winner in the MCU market is ARM, as they control the core low-power IP and security features. While companies can develop these themselves, using ARM is often easier.â€
Same problem, different strategies
Currently, two conflicting trends are shaping the MCU landscape: falling ASPs and rising complexity. This puts more pressure on manufacturers to improve efficiency in their processes and methods.
One approach is to fully utilize the features already built into these devices. However, many companies are not doing this effectively. Andrew Caples, senior product line manager for embedded software at Mentor, a Siemens company, said, “Take TrustZone—many of its features go unused. You can increase reliability and create memory partitions, but it’s not always fully leveraged. Power management is another feature that can significantly impact battery life. Some MCUs have over 16 power states, but switching between them is complicated. To take full advantage, you need to invest more in software.â€
The rise in complexity has led MCU manufacturers to adopt more advanced process nodes, allowing more memory, connectivity, and processing power to be integrated into the same space. This is a practical application of Moore’s Law in the MCU market. For 32-bit MCUs, the current leading edge node is 40nm, with some companies developing 32/28nm versions.
Geoffrey Tate, CEO of Flex Logix, noted, “The challenge is that MCU companies have developed dozens or even hundreds of SKUs due to differences in serial I/O pin assignments. Some use SPI, others UART, or different hardware configurations. As 40nm mask costs rise, maintaining so many variants becomes costly. Each variant requires a certain number of lookup tables for serial I/O programming.â€
To address this issue, one solution is to integrate embedded FPGAs into MCUs, increasing their flexibility and enabling them to meet diverse market needs without requiring a new MCU for each application.
Another method is to improve verification processes and reduce the time required for the back-end design flow.
Frank Schirrmeister, senior director of product management and marketing at Cadence, explained, “Portable Stimulus is interesting because it simplifies the process. As MCUs become more like systems, some companies are selling these designs with custom software. This allows for better evaluation.â€
One device, multiple uses
All these approaches help turn MCUs into ready-to-use devices that can be quickly customized for specific applications or vertical markets. However, the entire process still needs further simplification.
Bill Neifert, senior director of market development at ARM, said, “In EDA, there is more tolerance for tool quirks. But in the MCU market, developers want a debugger and compiler that work seamlessly. Their final product isn’t just a chip—it’s a system. They need something that effectively solves their problems. You provide a compact device with many features, and it must meet the needs of both advanced users and casual developers.â€
The key is finding a balance between time-to-market, cost, and optimization, which can vary depending on the application.
Semico’s Itow added, “Some companies focus on specific applications, such as IIoT, while others take a general approach and then customize around it. There are many opportunities, and even with integration, we may see new entrants in the market.â€
The real drivers are the IoT and consumer electronics markets, where MCUs are tailored to meet the needs of these segments. They include memory, processing, security, and communication technologies, though they are generally less powerful than SoCs.
“In the past, microcontrollers were mainly used in industrial and automotive markets with longer sales cycles,†Neifert said. “Now, they are increasingly found in consumer electronics, where content must be up-to-date. As more devices reach consumers, fast turnaround is essential, meaning the same microcontroller may have 10 different applications, many of which depend on software.â€
Some will be applied to systems that haven’t existed before or as general-purpose add-ons rather than core components.
Bill Hutchings, senior product marketing manager at Microchip Technology, said, “Some higher-performance cores and clocks are typically independent of microprocessors. For example, sensor hubs usually have a preprocessor and act as a middle-tier microcontroller.â€
Redefine the MCU
Over the years, the differentiation factor between microcontrollers has been functionality. 32-bit MCUs are significantly more powerful than 8-bit ones, hence the higher price. However, as companies evolve, they are now developing devices that rival low-end microprocessor product lines.
Historically, there were clear distinctions between microprocessors and MCUs. Microprocessors use both internal and external memory, while traditional MCUs rely solely on internal memory. This is beginning to change, with some MCUs now offering external memory connectivity.
“Fifteen years ago, if you showed 100 engineers a microcontroller and a microprocessor, they could easily tell the difference,†said Steven Woo, distinguished inventor at Rambus. “Today, even the same group of engineers might struggle to distinguish between the two. Moore’s Law is part of the reason for this ambiguity. More transistors on a die allow for more functionality.â€
With better space utilization, we can also pack more on-chip and off-chip memory. MCUs typically use a combination of DDR2 and flash memory. Due to increased density, DDR2 memory sizes have grown to 2MB, along with 2MB of embedded flash.
“Since at least 6 or 7 years ago, 32-bit devices have had the ability to connect to external memory, but few have taken full advantage of this,†said Stuart McLaren, microcontroller product manager at STMicroelectronics. “We’ve recently seen more use of the system packet interface, with more NVMs outside to store data and code. The key change is improved performance and more features. As more applications become interconnected, you’ll need simple microcontrollers to collect and aggregate sensor data.â€
The microcontroller is also moving upstream toward the cloud.
“There are many cloud services running on gateways, performing advanced analytics,†McLaren said. “We’ve seen external memory used for graphics processing, typically a 1 or 2-frame buffer, which we can render and refresh. We’re also seeing more microcontrollers entering the three areas of the IoT—home and city, smart industry, and everything else. Every application has processing and security requirements. They also need to interface with real-world systems and require some form of connectivity, whether RF, low-power Bluetooth, or other near-field processing. Managing power is crucial across wearable and industrial applications. MCUs are the heart of the IoT.â€
According to Dipesh Patel, vice president of physical IP engineering at ARM, MCUs are also being used in new applications like asset tracking. “With 32-bit MCUs, you can track the journey of a component securely. You couldn’t do this with 8-bit. MCUs are becoming more complex. On a basic level, they can store and transfer data, but now they can do more thanks to increased memory.â€
He pointed out that on-chip flash memory is increasing, especially in advanced designs moving to 40nm or even 28nm. Most MCUs still use older processes, some as old as 350nm, but some IoT designs are now using 65nm and 40nm processes.
Mass customization and niche
Cost has always been a key driver for MCUs. While power efficiency was the main consideration for the past decade, it's hard to find a system without an MCU. Gradually, system vendors are starting to design MCUs for new tasks, many of which weren't considered a few years ago.
“We’ve seen them used as companion chips for fully integrated microprocessors and for security applications,†said Jeanette Wilson, product marketing manager at Microchip. “You might need basic authentication, and MCUs can be used as hardened key memory. This requires a handshake with an ECC (Elliptic Curve Cryptography) SoC, which can be placed in a tamper-proof package or used as an entropy source. You can also add encryption/decryption, which adds another layer of security and includes a monotonic counter to prevent replay. This is usually done in software, but doing it in hardware saves 8,000 to 12,000 lines of code and improves execution speed.â€
MCUs are also appearing on expansion boards and alongside sensors that measure a wide range of metrics, from motion to temperature.
STMicroelectronics’ McLaren said, “We run them at frequencies up to 400MHz. In the past, you only saw this speed on MPUs. We’ve also seen cases where the microcontroller itself is connected to multiple microcontrollers, with APIs between the main MCU and others.â€
To sum up
The difficulty of distinguishing between different types of logic devices is growing, and as advanced packaging continues to be used in more designs, this challenge may persist.
IC Insights’ Lineback said, “In the 1980s, MCUs were referred to as system-on-a-chip or computer-on-a-chip. Eventually, the World Semiconductor Trade Statistics Organization (WSTS) will define these categories differently.â€
At the same time, MCU vendors are working hard to increase the value of their devices and slow down the price decline, as the trend of falling prices brings severe technical challenges to the industry. Will they add more flexibility, reduce the number of devices being developed, or change the way these devices are designed and verified? It remains unclear. However, the importance of MCUs will only continue to grow, so these issues will need to be addressed.
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