Arris’ acquisition of Pace created the largest set-top manufacturer, with 22% worldwide market share of the set-top box market.

Arris is about three times larger than most competitors including EchoStar, Technicolor, Cisco, and Humax. Set-top semiconductor leader Broadcom was also acquired by relative newcomer Avago, an acquisition not directly impactful to the set-top market, but a sign of the significant consolidation that will continue to impact the market in the next few years, according to ABI Research’s Set-Top Box and Home Networks Market Research.

Sam Rosen, practice director at ABI Research commented, “There are three drivers to set-top box market consolidation: geographic reach and overall scale, platform expertise, and end-to-end technology capabilities. On the semiconductor side, we expect Intel or Marvell to bulk up their portfolio around the set-top and broadband IC markets. From the hardware / OEM side, we see large players such as Ericsson picking up companies, possibly including Technicolor. We also see TiVo extending its end-to-end capabilities on the infrastructure side, and possibly adding manufacturing expertise for the operator market.”

The Pay TV set-top box market is driven by transition to digital platforms and HD video worldwide—a process that continues apace in many regions. Excluding the somewhat volatile Asia-Pacific region, the market shows a gentle 2% annual decline through 2020 from a high of about US$12.6B in 2012 to 2014. The Asian market was nearly US$6.5 billion in 2014, and unless other regions approach their digital transitions with the zeal that China did over the last few years, will slide nearly 25% by 2020.

“Business consolidations will also be joined by technology consolidations over the next few years,” continues Rosen. “Operators have already taken more ownership of Wi-Fi access points in their broadband products. The coming years will bring consolidation of broadband access points with video set-top boxes, integration of home automation and control functions, and eventually integration of the fixed access network with cellular access networks.”