The frost that's permeated the semiconductor memory industry for nearly three years is leading some nonvolatile-chip vendors to turn to analog technology to warm their bottom lines.
While much has been made of the DRAM market's shaky state, nonvolatile-memory manufacturers are facing similarly poor business conditions, defined by oversupply, sliding prices, and negligible profit margins. Just as some DRAM players have opted out of the market and others have diversified into new areas, so have flash and
EEPROM IC suppliers been contemplating their next move.
Threatened by the lack of working capital that has plagued vendors since the memory market soured in late 1995, companies such as Catalyst Semiconductor Inc. and Xicor Inc. are embarking on new paths to move beyond a commodity-only market base.
"The primary reason why companies like Catalyst and Xicor are doing so badly in the memory business is that they're pure commodity suppliers," said Jim Liang, an analyst with Dataquest Inc., San Jose. "When you take a third-tier company like Xicor, the situation is so bad that they need to look at survival strategies."
To that end, Xicor-which makes a variety of EEPROM-based devices-today will move into the analog market with a programmable operational amplifier that integrates two digitally controlled potentiometers. While it will maintain its EEPROM business, the Milpitas, Calif., company is diverting 40% of its engineering, test, reliability, and sales and marketing resources to the op amp effort, according to Bob Anderson, product line manager for Xicor.
The aim is to capitalize on the inherent analog nature of the EEPROM cell as a means to propel the company into a more profitable, less commodity-based market, Anderson said. Xicor posted an $11.5 million loss for the first half of 1998 on revenue of about $54.5 million, compared with earnings of $4 million on sales of nearly $61.5 million for the same period last year.
"Xicor has been known as a nonvolatile-memory house for some years," Anderson said. "But this is an extremely competitive marketplace, and while Xicor has actually been very innovative, innovations become commodities overnight."
The culmination of a two-year, companywide restructuring effort, the strategy pairs Xicor's home-grown analog strengths with its prowess as a digital-CMOS designer to enhance what have traditionally been stand-alone analog parts. The user-configurable X9430 op amp, for example, includes gain, offset, power management, and other field-programmable features that can be set to automatically adjust for current drift and changes in temperature, power supply, and other operating conditions.
The device is a natural outgrowth of Xicor's strengths in the digitally controlled potentiometer market, and, with its lower chip count, reduced power requirements, and smaller real-estate demands, should do well in a variety of applications, according to observers.
Xicor will use its so-called Smart Analog technology to develop other products, but the company's foray into a mature market will require it to beef up its design capabilities, Anderson acknowledged. "Designing an op amp is one thing-designing a DAC is quite another," he said.
"I don't think personally that [Xicor's] E-squared technology is an analog technology per se," said Dataquest's Liang. It's more or less a digital technology. [Regarding] designing analog components together with [EEPROM], I think the company has to acquire significant analog design talent if they're going to become a contender."
At a point when some of the industry's largest analog component vendors have reported large losses, new entrants to the market may have a tough time of it, according to Liang. "I do not view the analog IC market as being wide open to new players," he said.
Nevertheless, Catalyst Semiconductor is also preparing its entry into the analog arena. The Sunnyvale, Calif., company, which was delisted from NASDAQ in August, is fighting hard to free itself from a financial tangle.
To better its long-term chances, the company next month will roll out a family of embedded EEPROM supervisory circuits for microprocessors and microcontrollers, according to Bassam Khoury, Catalyst's vice president of marketing. The devices will integrate Catalyst's analog EEPROM technology to offer programmable reset threshold levels for power-up and power-down operations. The first devices will include a I2C interface, with three-wire and serial peripheral interfaces to follow, Khoury said.
"That's where we see the future of the company," he said. "We've been trying to build these for the last year or so, and now that we're in a much more stable financial situation, we're able to launch these products."
After losing $10.1 million in its fourth fiscal quarter, ended April 30, Catalyst trimmed its first-quarter losses to $600,000 on $7.3 million in revenue. The company recently improved its cash position with a $1 million equity investment from Elex NV, and has restructured its debt load with its principal lender.
Catalyst has been amassing analog design expertise for some time, Khoury said, and its holdings include an analog design center in Romania. It has also moved its
EEPROM products to 0.8-micron linewidths, and should arrive at a 0.5-micron design rule early in 1999 with the help of foundry Oki Semiconductor. Still, Catalyst remains the target of takeover rumors, and, as with Xicor, will require additional design expertise in the long run, according to observers.
"They're definitely in a need situation," said Alan Niebel, an analyst with Semico Research Corp., Phoenix. "Catalyst either needs to find a sugar daddy who will buy them, or partner with them, or give them some kind of cash infusion, or they need to do some kind of licensing deal to acquire technology that has a differentiating feature to it."