Greetings from Down-East Maine where summer suddenly arrived--at least temporarily. While New York, Boston, and most of the North East suffered this week as the mercury peaked in the 90s--even in Maine--we had our usual summer weather on the coast: 60F and zephyr on-shore breezes. It's time to start planting here, but I'll finish this week's column first.
March IC sales don't
indicate early upturn
The optimists are still looking for a turnaround in the slumping chip business this year, but you'd never guess it was coming based on the latest industry sales figures. Global revenues kept dropping in March, according to the Semiconductor Industry Association.
March revenues fell to $14.4 billion, down 7% from the prior month and off 4.5% from the year-ago month. But the SIA continues to put the best face on the correction. While sales continue to decline due to an "inventory overhang and macroeconomic factors, we continue to believe that the industry will complete the inventory correction in the third quarter and the recovery will commence in the fourth quarter," declares SIA CEO George Scalise. I guess he has to be bullish.
Sales were off the most in the Americas, falling nearly 11% from year-ago figures and down more than 13% from the previous month. Asia Pacific did a little better, with sales dropping 10.4% from the year-ago month and 5.6% from February. Europe was flat compared to a year-ago, falling less than 1%, and down only 2% from February.
The brightest picture came out of Japan. Revenues were up 7% from March a year ago, but down nearly 5% from February sales.
(See May 2 story.)
Chip industry optimism still
unwarranted, Advanced says
Advanced Forecasting--maverick market researcher that beats the promotion drums hard--says the grim semiconductor sales totals for March only confirms its warnings that the industry downturn will continue despite the optimism now being expressed at some chip houses.
Integrated circuit revenues in March were off 24% from the latest peak hit last October, according to Advanced. "The decline will continue," declares David Crume, marketing head of the market researcher. He claims Advanced's quantitative forecasting models have accurately predicted past semiconductor market cycles, while other analysts continue to shift their outlooks.
"Concerns should now not only focus on when to expect the bottom to the current IC recession, but also what level of demand will the industry experience post recession," says the Cupertino, Calif., research firm. "It's the beginning of May and many are already waiting to see the size of Santa's satchel this December."
(See May 2 story.)
AMD delays Hammer so
it can build chip with SOI
Advanced Micro Devices has taken a big gamble by delaying its Hammer processor family by two to six months--a decision that could push the release of this chip into the second half of 2002. What the gamble boils down to is the big chip maker is trading some time to improve the new chip family's performance.
Originally set to go on the market in the first half of this year, the new parts include Clawhammer for PCs Sledgehammer, which is being developed for four- and eight-processor server systems. The Hammer series will process data in 64-bit sizes with servers targeted as a growing opportunity beyond desktop PCs.
AMD is delaying the new family because it has decided to build it with silicon-on-insulator process technology. "Previously, the first part was not going to be on SOI, but we've revised our road map," says an AMD spokesman. Our SOI offerings will be in the mobile space all the way up to the server space."
AMD is planning on a short delay. "It's early second half, not late second half," he maintains. The delay extends the life of AMD's Athlon processor line into 2003--previous road maps had Athlon phasing out several months earlier. AMD wouldn't say which AMD fabs would produce the parts.
Just two weeks ago, NEC revealed it would be using a 1.33-GHz Athlon processor for a server appliance, a relatively untapped market for AMD. The chip maker also believes that SOI will help it to develop business outside the desktop PC market and help to give it a sharper focus on the mobile processor segment.
The SOI technology that AMD will use is being licensed from IBM Microelectronics. It adds a layer of oxide between silicon layers, gating energy that was previously lost. Proponents of this process believe the reclaimed energy will add performance to transistors even though it will be consuming less power.
But there is still major disagreement in the industry over the use of SOI in chip making. Intel--usually a front-runner in new process technologies--has been saying publicly that the power advantages achieved through SOI drop off as process geometries shrink.
(See May 1 story.)
Via tries hard to keep up
with AMD, Intel in MPUs . . .
You gotta hand it to Via Technologies. They've got guts! The Taiwanese chip maker is going all out now to compete with two highly competitive giants--Intel and Advanced Micro Devices--who account for nearly all of global microprocessor sales, one of the biggest and most competitive of any chip market.
This week Via came out fighting with its latest microprocessor roadmap, including an x86-based chip that will run up to 1.2 GHz. As are all of its MPUs, the new chip will be aimed at the low-end, or "value" PC market. The company plans to announce this microprocessor by year's end, with shipments slated for late 2001 or early 2002.
It is focusing its MPU marketing efforts mainly at several developing nations. Via expects China to be one of its largest markets for MPUs, with Brazil, India, and Mexico also developing into key markets.
Processors still account for only about 5% of the company's sales. The bulk of Via's revenues still come from its PC chip set business. Total sales are expected to climb from $1 billion in 2000 to $1.4 billion this year.
Via's current high-end processor is a 733-MHz chip, which was rolled out in March. Dubbed Samuel 2, the chip will be offered at clock speeds up to 866-meghertz later this year. In the third quarter, the company will provide details of another processor, codenamed Ezra, which will run at speeds up to 1 GHz. It will be built by Taiwan Semiconductor Manufacturing Co. with the foundry's 0.13-micron process technology.
(See May 1 story.)
. . . while its PC chip sets
are flying out the door
As Taiwan's Via Technologies goes head-to-head with AMD and Intel to boost its share of the microprocessor market, it ain't doing all that bad in its primary business of PC chip sets.
In April, the chip maker reported sales of $99 million, an increase of 33% from the same month last year. In the first four months of 2001, Via sales amounted to $418 million, an increase of 69% from the January through April a year ago.
The company attributed the strong results to its PC chip sets, which go into PCs powered by AMD's popular processor lines.
(See May 2 story.)
U.S. gives green light
to SVG-ASML merger
As we predicted, the merger of San Jose's Silicon Valley Group and Holland's ASM Lithography is on--finally.
ASML said on Thursday that a deal with the U.S. government clears the way to complete the acquisition of the last U.S.-based lithography system supplier within the next few weeks. "We have reached a solid agreement that meets the needs and concerns of the U.S. government and allows ASML and SVG to proceed forward," says ASML CEO Doug Dunn.
The deal comes after a 45-day review of the merger when concern was raised in several quarters, including a highly publicized lobbying effort, over national security issues and the protection of defense-related technologies. After government agencies couldn't reach an agreement on how to handle the $1.6 billion stock acquisition, the hot potato was passed on to the White House with no official recommendation.
(See May 3 story.)
U.S. demands fit ASML's
original goals in buying SVG
Many of the restrictions and obligations that ASM Lithography agreed to in order to buy Silicon Valley Group were compatible with ASML's original goals in buying the U.S. lithography system supplier.
One requirement that ASML hadn't counted on was to make a "good faith effort" to divest SVG's Tinsley Laboratories subsidiary within six months after the completing the acquisition. Tinsley's lens-polishing technology was one of the major U.S. concerns regarding the merger. Any sale, however, will be contingent on the new owner making Tinsley's lens-polishing technologies available to SVG. All of SVG's lenses are produced by Tinsley and ASML wants that to continue.
ASML has promised to comply with U.S. export control requirements in selling any systems or technologies from Tinsley, SVG, and SVG's Lithography Division. "We always comply with any country's export control requirements" says ASML CEO Doug Dunn. The Dutch company will have insure that any non-U.S. citizen must have U.S. government clearance before gaining access to information on sensitive technologies at SVGL and Tinsley, he adds.
ASML also reached agreement with the U.S. on how it will handle the SVG Lithography operation. "We will maintain SVG Lithography R&D and production facilities in the U.S. for a period of 5 to 10 years," Dunn says. And ASML promised to make minimum levels of investments in SVG in the U.S. as a percentage of sales for a number of years.
"While it is unusual to have that requirement place on a company, we have no disagreement because it was our intention to develop the R&D capabilities in the U.S.A.," Dunn claims. ASML also has agreed to advise the U.S. government of any plans to divest operations from SVG, the SVG Lithography operation and Tinsley--if it continues to own the lens-polishing subsidiary. "We are required to give them a 40-day notice period," he says.
ASML will have to appoint a U.S. citizen on its advisory board. Dunn already has made an offer to Michael J. Attardo, an SVG board member and retired president of IBM Microelectronics. And to keep the U.S. posted, ASML will provide reports to the government twice a year on the status of its obligations. That should satisfy most everyone.
(See May 3 story.)
Intel would have lost big time
if litho merger had been killed
It's no wonder that Intel had been the most vocal supporter of the merger of San Jose-based Silicon Valley Group into Holland's ASM Lithography. The chip giant might have had the most to lose if the deal had been shot down by the Bush administration.
While Intel argued that the merger was crucial to the U.S. chip industry, the chip giant may have had its own reasons for pushing the acquisition. Behind the scenes, sources say, Intel actually brokered the deal for good reasons. Its entire manufacturing strategy could hit a major snag if the deal had been blocked.
Intel currently has two primary lithography tool suppliers--SVG and Japan's Nikon--and the chip maker would like to keep it that way, according to sources. SVG has repeatedly warned the chip industry that it would not have been able to survive long term at its current size.
The prospect of SVG going under left Intel and other chip makers like IBM exposed and vulnerable in next-generation technologies, observers say. One good way to protect Intel and IBM would be to make SVG a part of ASML, which already is the world's second largest supplier of lithography equipment to wafer fabs.
Another vital issue here as far as Intel was concerned was next-generation lithography (NGL) and Intel's technology of choice--extreme ultraviolet. Intel is counting on EUV to keep it one step ahead of its competition, most notably microprocessor rival Advanced Micro Device.
Both SVG and ASML are working with the U.S.-based EUV LLC consortium and both are licensed to build and sell the initial EUV tools based on the consortium's technology. But analysts believe that Intel wanted the merger to accelerate the availability of EUV tools.
Industry observers figure Intel may be one of the few companies in the world that will be able to afford the first EUV systems. Some lithography experts estimate the price of early EUV systems will be as high as $40 million each. It's possible that ASML's takeover of SVG could help to drive down the high cost by leveraging technologies at both companies.
(See May 2 story.)
Xilinx moving fast
to 300-mm output
In just one year, Xilinx could be getting up to one-third of its product revenue from chips produced on 300-mm wafers. Now that's moving.
A Japanese fab jointly owned by Hitachi and United Microelectronics already has started producing the chips for the FPGA supplier, which is now accelerating its plans to move more of its field-programmable gate arrays to the larger diameter wafers.
The motive is simple. It will cost a lot less to make next-generation FPGAs on 12-inch wafers vs. 8-inch substrates. The new FPGAs are giants: Each will have the equivalent of more than 200 million transistors. It doesn't help much to learn the following, but it sure is impressive. The 300-mm fab line will pump out 37 billion transistors per wafer!
"In the next 12 months, the products produced at Trecenti the Japanese joint venture could become a second source for our Virtex and Spartan series FPGAs, representing up to one-third of our product revenue," says Dennis Segers, Xilinx senior vice president.
UMC claims it's the first to provide FPGA production on 300-mm wafers and is the only company with three 300-mm facilities running or in the planning stage. Single-wafer processing tools in Trecenti' fab has enabled a speedy ramp of 300-mm production, it says. "Trecenti has devised a completely new methodology for single-wafer processing that employs full automation with high-speed transfers to realize the shortest possible cycle time," brags president Toshio Nohara.
(See May 2 story.)
GaAs ICs need lower ASPs
to compete with SiGe chips
The outlook still looks bright for gallium-arsenide devices in the fiber-optic analog IC market, but silicon-germanium chips could change the picture fast.
GaAs devices will remain the predominant technology here, says a new report from Strategy Analytics, but suppliers will have to reduce their costs to compete against onrushing SiGe chips. The fiber-optic, analog GaAs market will grow at an annual rate of 34%, says the Boston market researcher, shooting up from $350 million in 1999 to $1.621 billion by 2004. Pretty darn optimistic, if you ask me.
"While the current economic malaise has resulted in GaAs companies revising projected earnings, the fiber-optics market for analog ICs will provide a growth market for the GaAs industry," observed analysts Asif Anwar, who tracks the industry for Strategy Analytics.
"The 10-gigabits-per-second market will become the largest market and will be dominated by GaAs technology," says Strategy Analytics analyst Asif Anwar. "However, GaAs companies will have to significantly reduce ASPs in the near future if they are to remain competitive in the face of an onslaught from SiGe," he points out.
(See April 30 story.)
IP industry in Taiwan
heads for first down year
Taiwan has more than the PRC to worry about these days. For the first time ever, Taiwanese production of information-technology hardware fell from the year-ago quarter. And one local market research firm has changed its 2001 forecast from 15% growth to a decline of 0.3% to $41 billion. Few analysts foresee an uptick in end-user demand any time soon that would help burn off excess inventories.
"It's worse than we expected," notes Cynthia Chyn, consultant with the Market Intelligence Center, which tracks Taiwan's IT sector. "The U.S. slowdown is more severe than we thought . . . and we don't think the year will end in growth for Taiwan." In the first quarter, the island's IT production posted a record year-to-year drop of 10% to $8.5 billion.
The decline is dragging down Taiwan's entire economy. The Taiwan Economic Research Institute has lowered its 2001 forecast of annual gross domestic product growth from 5.69% to 4.75%. GDP year-to-year growth was a slim 3.3% for the first quarter, the institute estimates, which is a record low. April exports and imports are expected to drop into double-digit declines.
Through the first few months of this year, it seemed like Taiwan's notebook industry might be a bright spot in the slowing IT sector. Quanta, Taiwan's top notebook PC maker, boasted big increases in unit shipments and said the slowdown would provide an outsourcing boost to its bottom line.
Notebook PCs were also expected to be a bright spot this year, but instead, notebooks experienced an 18% decline in the value of units shipped and a 6% drop in volume in the first quarter. Analysts and industry experts alike are now negative about the short-term and are looking at the fourth quarter for a turnaround. "But any estimate is just a wild guess," says Henry Wang, researcher at Entrust Securities. "TSMC and UMC think the second and third quarter will be the bottom, but that could just be blind hope."
(See April 30 story.)
Catamaran makes it
without going public
Who says you have to go public to make a bundle with your startup? Catamaran Communications, set up just 18 months ago to develop chips for high-speed optical networks, is selling out to Infineon Technologies for stock worth a cool $250 million--or $5 million per employee. Not bad, huh?
The San Jose company has 50 employees and is focused on 10-gigabit Ethernet applications, and OC-768 (40-gigabit-per-second) and OC-192 (10 gigabit-per-second) synchronous digital hierarchy/synchronous optical networks (SDH/SONET). The fabless chip company claims design expertise in SDH/SONET, asynchronous transfer mode (ATM), time division multiplexing (TDM), packet over SONET (PoS), and Ethernet.
Catamaran's product offerings will be combined with the German company's existing lineup to offer a total line card solution from the optics to the network processor interface. Catamaran's products are targeted at high-growth markets for terabit routers, add drop multiplexers (ADMs), dense wave division multiplexers (DWDMs), and digital cross connects (DCS), according to Infineon.
Infineon is aiming high. It's shooting for a leading position in the fast-growing optical networking market and high-speed line card segment at speeds of 40 gigabits per second and beyond. It hopes to do this by maintaining Catamaran's Silicon Valley start-up culture and capitalizing on the synergies with Infineon's existing wide area network (WAN), fiber optic and high-speed communication business units.
(See April 30 story.)
Deal will make it easier for
National to use foundries
National Semiconductor is taking a major step to outsource more of its chip manufacturing. To ease its ability to use outside foundry services and speed IC development, the Santa Clara-based chip maker has signed a multi-technology, multi-process licensing deal for design libraries from Artisan Components.
"This agreement is an industry milestone as it signals the first major integrated device manufacturer to commit to a far-reaching and comprehensive outsourcing plan," declares Mark Templeton, Artisan CEO.
National is using Artisan's libraries to create a common design platform for system-on-chip products and to make it easier to ICs between its own wafer fabs and foundry services at Taiwan Semiconductor Manufacturing Co. Artisan is providing National a complete set of memory generators, 1- and 2-port register files, ROMs, SAGE-X standard cell libraries, and I/O libraries optimized for TSMC's 0.25-, 0.18-, 0.15- and 0.13-micron process technologies. National also will be able to access Artisan's partner network of design services, software tools, and IP providers.
(See May 1 story.)
EDA IPOs now seem to be hot,
Simplex soars on opening day
Hey, there's life in the old IPO market yet. Simplex Solutions' initial public offering hit the Street with a bang on Wednesday. The San Mateo supplier of back-end analysis tools for IC design shot up 76% in its first day to $21.20.
Simplex Solutions' successful debut, along with recent EDA public offerings from Synplicity and Verisity, seems to confirm the worm has turned for the EDA industry. The EDA folks took plenty of hits from investors at the height of the dot.com boom last year for their petty valuations as compared with other electronics sectors.
Now, investors seem to be looking for stability amid the high-tech downturn, according to Penny Herscher, Simplex CEO who predicted 18 months ago that EDA would grow into the "swan" of the electronics industry. "EDA is tied to semiconductor R&D spending, and R&D tends to be steady, even when the macro semiconductor numbers are going up and down," she says.
(See May 2 story.)
Price isn't coming down
fast enough for DDR DRAM
Despite aggressive pricing on the part of Micron Technology and Nanya Technology, sluggish demand in the PC market is crimping demand for double-data-rate SDRAM. The suppliers are pushing hard in order to get price parity with the older synchronous DRAM.
Nanya, a large supplier of DDR memories, has pushed out its time frame for price parity between DDR modules and SDRAM modules, says release of a DDR-compatible Pentium 4 by Intel would serve as a needed catalyst for DDR module demand.
"Price parity in June will probably not happen," acknowledges Charles Kau, Nanya EVP. "It will probably be in September when the real conversion happens. Until then," he says, "you will still see a premium for DDR of about 20%."
Asia's largest memory maker, Samsung Electronics, has put the brakes on DDR production. "The DDR ramp has been slowed down somewhat due to the slowness of the development of the desktop market and some delays in the server market," says Jon Kang, SVP. "But we hope our DDR products will start to ramp again sometime late in the fourth quarter."
Chilling DDR demand is the modest performance gains obtained from pairing a Pentium III with DDR SDRAM and Intel's aggressive promotion of the Pentium 4, which for now supports only RDRAM.
(See May 3 story.)
TI chips hike upstream
cable capacity by 50%
When the market finally arrives for next-generation digital cable services, Texas Instruments figures it will be ready. Its new chip set based on advanced Time Division Multiple Access technology will give networks a 50% increase in upstream capacity.
Two ICs--a dual-channel receiver for the headend of cable networks and a chip for customer premise equipment--will provide three times the upstream bandwidth per channel. This offering will permit service operators to offer symmetric services over digital cable, such as voice, multi-session videoconferencing, and peer-to-peer networking.
TI says that its new product should overcome the great disparity between the capacities of upstream and downstream bandwidths in today's cable networks. Cable networks downloads operate at 30-to-40 megabits per second while uploads run at only at 5-to-10 megabits per second, TI says. When cable modems are used primarily for high-speed data delivery, this isn't a problem. But new two-way applications will require symmetrical capacity, TI says.
(See May 3 story.)
Cirrus Logic reinvents itself
as consumer chip supplier
Pushed by the current industry downturn, Cirrus Logic has turned to a new business model. The Austin, Tex., chip company will move toward the higher-growth and higher-margin entertainment electronics business. It will concentrate on analog and digital signal processing (DSP) products for consumer entertainment applications and de-emphasize ICs for magnetic storage peripherals.
CEO David French described the new Cirrus as "the semiconductor industry's largest pure play in consumer entertainment electronics."
Like the rest of the industry, the company is hurting from current market conditions. It is now forecasting a 10-to-15% sequential drop in total revenues in the current quarter from the March 31 period. Magnetic storage products, which were responsible for the sales dip, were forecast to decline another 20% in the June quarter.
In the fiscal fourth quarter ended March 31, the chip company reported a 4% sequential decline in revenues to $199.7 million. These sales were 25% higher than the same quarter last year. Revenue for fiscal 2001 hit $768 million.
(See May 2 story.)
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(Click here for last week's Semiconductor Alert!.)