Data converters are somewhat shielded from the cycles that have boosted and burned other semiconductor markets in the past year. Representing about 6% of the analog-IC market, analog-to-digital converters are traditionally a steady market overall.
But underneath the placid exterior, this market is not totally immune from cycles. Currently, data converters are experiencing everything from a slump to modest success to rapid growth, depending on the end market.
According to converter manufacturers, the control and automation segments are doing the best, the communications market is mixed, and the consumer business is taking it on the chin.
"One [part of the business] is growing like crazy and the other part is deader than a doornail," said Don Traver, marketing manager at Texas Instruments Inc.'s Data Acquisition Products Group in Tucson.
That makes the overall market picture for converters fuzzy. "I'm getting really jumbled reports on the data converter side," said Ada Cheng, an analyst at Dataquest Inc., San Jose. "I'm not get-
ting a consistent story across different applications."
The shift in the control and automation markets to using more sensors and digital systems, and therefore more converters, is buoying that market. OEMs continue to replace electromechanical and manual controls with digital systems.
"That's one of the nice things about the industrial control and automation area," said Willie Rempfer, design manager for data conversion products at Linear Technology Corp., Milpitas, Calif. "It doesn't have the spectacular growth, but it's much more reliable. It's less volatile because it's not so much consumer-driven."
Put in different terms, converters in applications that address a primary need, such as medical devices, have some built-in stability. "You don't have to buy a set-top box; but if you're sick, you have to go to the hospital," said Raja Yazigi, international product marketing manager at Philips Semiconductors in Caen, France.
"A big part of our data converter business doesn't vary with the Nasdaq," Yazigi said. "[Even] if the Nasdaq goes down, people still need medical care and infrastructure."
Slowdown or no slowdown, Philips is seeing about 15% a year growth in high-speed data converters, according to Yazigi.
Another area of surprising strength is automotive applications. Even though auto sales have dropped sharply, new cars include much more electronics, and that means a lot of data converters.
Of his own new car, Linear Technology's Rempfer said, "The thing has sensors everywhere. If you close the door and don't close it all the way, there's a little motor that pulls it shut. It's an example of how everything is being controlled digitally."
Drilling for data
In fact, in some markets, the negative economic conditions have actually helped. A notable example is the energy market.
"Whenever the price of oil goes up, we like it," said Keith Coffey, marketing manager for the data acquisition products division at Cirrus Logic Inc., Austin, Texas. "That means they explore more, and we have big customers there."
Currently, U.S. petroleum exploration is running at its highest level in 10 years. Each rig represents the work of multiple seismic exploration teams. Data converters play a major role in seismic exploration and oil-well logging, especially as transducers to convert ground vibrations into digital signals.
A modern seismic oil exploration setup may use 1,000 or more sensing elements, called geophones, each of which produces analog data that needs to be converted to digital for logging and analysis. In some cases, each geophone has its own data converter, while in others, groups of 10 or so geophones are converted by a single intermediate box.
The data converter market breaks down into three sectors. The communications market demands high sample speeds at fairly low resolutions-typically 60 to 80 megasamples at 10 to 12 bits. The control and automation markets want high precision-up to 24 bits-and much lower sample rates. In between is the audio market, which wants high-precision parts with sample rates toward the high end of the control and automation range.
Use of converters always involves a trade-off between resolution and sampling speed, which depends on what the application is actually doing. Consumer audio systems, for instance, don't need more than 12 bits, but they do require a high sampling speed to counter noisy data. At the other end, an industrial or medical instrument usually sacrifices speed in order to squeeze every bit of resolution it can out of the data converter interface. This is a fundamental balancing act that must be performed with nearly every data converter application.
It's difficult to design for 24 bits, said Jim Stevens, director of technical marketing at Insight Electronics Inc., a San Diego distributor. "It's hard to design an analog input stage that doesn't add more noise than the last significant bit of your converter."
One of the reasons behind the demand for more precision is that OEMs are taking advantage of the increased processing power in DSPs, according to Stevens. "From a noise standpoint, they're using the processors to set up software filters to program out the unwanted noise," he said.
Increasingly, the trend is to design data converters not just for a specific application, but with a maximum amount of input from specific customers, Philips' Yazigi said.
"We have to work closely with our customers and with the systems labs internally to have enough system information to develop the parts," he said. "If we don't work with a customer, we don't have enough information. If you want to develop, say, a 16-bit analog-digital converter, you have to find a driving customer. When you go to tune one parameter vs. others, you have to have the customer's input."
Data converter suppliers continue to offer a dizzying array of products; yet older converters tend to remain in the market for a long time.
Analog Devices Inc., for instance, doesn't know the life cycle of a lot of its data converters because the parts have been made for 20 years and are still selling, according to John Hussey, vice president for high-speed data converters at the Norwood, Mass., company. Products in the process control and instrumentation markets tend to have long life cycles, he said. This is changing as faster, more-precise, and lower-power parts cascade into the market. But it still means the data converter business is pretty steady, he added.
As a result of these seemingly contradictory trends-commodity-type products attuned to the customer's needs-OEMs have to choose from among a growing number of data converters, and increasingly they are optimized for slightly different jobs.
In data converter technology, the coming year promises more parts that are faster, have higher resolution, and lower power consumption-although not necessarily all in the same part.
Traditionally, designing with data converters has meant trading speed for resolution. If the designer wanted a high sampling rate, he had to accept less precision in the samples. This is becoming less and less true in an absolute sense as manufacturers introduce parts that are both faster and have higher resolutions. As a result, designers' choices aren't nearly as much a matter of either/or as they were a few years ago.
"I don't think designers had all the speed they wanted," Rempfer said. "When converters had a 20 or 30kHz sample rate, that was viewed as kind of inadequate [in control applications]. Now you've got analog-digital converters with 100, 200, or 400MHz sample rates."
One result is that OEMs are going to higher-resolution parts without sacrificing speed. "In the past, a lot of the industrial-automation stuff was 12 bit," Rempfer said. "With enhancements in digital processing power and data converters, virtually everything is going to 16 bits or greater. That enhances precision and gives higher resolution."
One way to use this extra speed is to migrate the conversion function further up the chain. "Converters are moving closer and closer to the antenna, sensor, or whatever," Philips' Yazigi said. "That takes higher performance in terms of resolution, bandwidth, and speed."
Doing the conversion early in the process cuts down on the number of analog parts needed in the circuit and maximizes the opportunities for digital processing, he said.
Power reduction is the other major goal of data converter design. Here, too, the progress has been considerable.
"A product we had 10 years ago was bipolar and had power consumption of close to a watt," Analog Devices' Hussey said. "Then we developed CMOS versions that consumed under 100mW. Now we've developed an architecture to allow us to use a single-digit milliwatt." That means the part consumes less than 10mW.
Some of the new communications applications demand even more speed and resolution, Hussey said. "There's still a strong requirement in the market for more performance in terms of speed and resolution," he said. "The primary advances in the market will be in that area."
Meanwhile, the combination of lower power consumption and smaller feature size in other data converters increases the opportunities for integration, Hussey said. "Every time you migrate down into lower geometries, that [increases] the performance of the part and the opportunities for system integration and the level of partitioning you do."
Dataquest's Cheng sees some bright spots in the current picture for data converters. For one thing, manufacturers are storing inventories in die banks rather than trying to dump them, she said. This not only helps maintain market stability, but also indicates that most manufacturers expect the downturn to be fairly short-lived.
"I'm not hearing about a whole lot of contract manufacturers dumping inventory," Cheng said. "The other good news is, you're not seeing irrational pricing like you did in the Asian financial crisis. There are going to be some spot markets with low price opportunities, but it's pretty clear that for the long term, people see this as temporary."
In the long term, data converters are going to grow because of the increased digitization in products, Cheng said. "Any time you need to interface with the real world, you need a data converter."
That will be key to data converters' growth in the next few years, according to analysts. The number of MP3, CD, CD-ROM, and DVD systems that will come on the market-along with industrial and communications applications-will be enough to double the worldwide sales and shipments of data converters, according to IC Insights Inc., Phoenix. From a $1.9 billion worldwide market this year, data converters will hit $3.8 billion in 2005, with unit shipments also doubling from about 700 million to more than 1.4 billion.
The volatility in the consumer data converter market, including consumer audio, has been apparent for some time. "One of the worst boom-or-bust product areas is consumer," Linear Technology's Rempfer said. "It's very, very grim. The prices are so low that sales curves go rocketing up and rocketing down. We've pretty much stayed out of that business."
"The audio market is extremely cutthroat," said Dave Ghilarducci, technical marketing manager for analog products at distributor Insight Electronics. "If you can save three cents a part, you can save a significant dollar value."
Still, the picture isn't entirely bleak, even in the face of a 40% chance of a recession, according to Dataquest's Cheng. Some parts of the data converter market are holding steady on price, and in others the pain has yet to work its way through the supply chain.
Average selling prices fell the farthest in Europe last year, from $3.25 to $2.64, but shot up from $2.45 to $3.32 in the Americas, according to data from the Semiconductor Industry Association.
"At the upper end, prices are hanging right where they are," TI's Traver said. "Looking at the first six weeks of data [for 2001], all of the top-end converters are probably 30% to 40% over what they were at the end of 2000."
The picture for less-expensive converters isn't nearly as rosy, however. "At the low end, we haven't seen a lot of pressure yet," Traver said. But when it does come, "it's going to be like the XFL out there on the manufacturing floor," he added.
That pressure will probably start hitting in April or May, according to Traver. "If someone places an order for 10,000 units, you're not going to see dropping prices. When we start competing for millions of pieces, then you'll see the price pressure come," he said.
"We were getting orders for 2 million pieces a month, and in the first six weeks [of 2001], we got purchase orders for 500,000 units." The result is that TI is only slightly below the overall run rate. "We figured that was across the board, but looking at the data shows that's not quite the case," Traver said.
Another difference shows up between OEM demand and demand through distributors. "The OEM demand looks very solid. Where we see a lot of uncertainty is on the distribution side," Analog Devices' Hussey said. "It's hard to read through the distribution demand to understand what's going on there." In announcing its lower revenue projections last month, Analog Devices cited a significant weakening in distributor demand.
Converter market leader Analog Devices is more heavily focused on communications-about 45% of its overall business-and its results reflect that. The company, which produces a broad assortment of converters and other analog ICs, saw its latest quarterly revenue rise 56% year over year, but decline 4% sequentially.
So far, the data-communications market has been one of the hardest-hit sectors in the semiconductor business. Computer sales are down, but they had been slowing for a couple of years. Communications-driven by handsets, broadband, and wireless-boomed in late 1999 and most of 2000 before slowing drastically in the last quarter of 2000. Last year's predictions of handset sales as high as 500 million units this year have been scaled back to around 400 million units.
Although the handset market is suffering, this hasn't had much effect on the data converter sector, probably because the high degree of integration in handsets means fewer stand-alone converters.
"Cell phones are a good example," Analog Devices' Hussey said. "The kind of products using specialized chips, often SoCs, do not have a direct impact on the market for standard data converters. Base-stations are heavy users of standard product data converters."
The basestation part of the business is still growing, in part because of the switch to higher frequencies to support higher data rates. "I really see the opportunities growing in that market over the next year," Hussey said.
Rick Cook is a freelance writer based in Phoenix.