A low-volume ASIC house that has received scant attention over the years managed last week to spark a new debate over whether the recent buzz from gate array suppliers points to a revival of the torpid market or a last-gasp attempt to rekindle customer interest.
Chip Express Corp., which has remained under the radar of most ASIC and FPGA vendors, said it raised $16 million in the first closing of a financing round that will remain open for another 120 days.
The funds will support an "accelerated program" to release 0.18-micron process technology by the end of this year and 0.13-micron in 2003, allowing the company for the first time to play in the same league as mainstream ASIC suppliers, executives said.
Chip Express has contracted with United Microelectronics Corp.-an investor in the company-for 0.25- and 0.18-micron processing. Under the deal, UMC, Hsinchu, Taiwan, will keep a 100-day revolving inventory of partially processed wafers and do customization on demand.
The company continues to work with Chartered Semiconductor Manufacturing Ltd. for 0.35-micron and Tower Semiconductor Ltd. for 0.6-micron.
The cash infusion highlights a metamorphosis under way at Chip Express since 2000 to become a volume ASIC supplier, though the company has struggled to elicit excitement from market watchers.
For the first 10 years of its existence, Chip Express focused on trying to minimize the turnaround time for ASIC proto-types. Using a laser technique, the company eventually reduced it to a day.
But as Chip Express came to be recognized as the quickturn leader, the market it served was being eroded by the increasing capability of FPGAs, said Stephen McMinn, president and chief executive of the Santa Clara, Calif., company.
Chip Express' architecture also produced large dice-an inefficient solution for volume production.
"That relegated us to doing prototypes and low-volume business," McMinn said. "We had a very limited served available market, and that was declining. We said, 'We've got to figure out a way to efficiently run volume production as an ASIC company, or cease to exist.' "
So Chip Express decided to take on the issue of mask costs, which will make an unprecedented 300% generational leap from $250,000 at 0.18-micron to $750,000 at 0.13-micron.
Believing that exorbitant tooling fees will open an opportunity between standard-cell ASICs and FPGAs, the company quietly ditched the laser and rearchitectured its product to be a "modular" gate array, using a repeatable logic structure for more efficient routing. Instead of customizing one metal layer, it now customizes three. The company boasts low mask costs of roughly $20,000 at 0.18-micron.
Chip Express introduced its modular 0.25-micron Slice family in the first quarter of this year.
Though impressed by the company's latest moves, analysts remain skeptical of the long-term opportunity. In February, Gartner Dataquest forecast the gate array market this year to decline 19% or more, to about $1.7 billion, after suffering a 50% drop in 2001.
Chip Express doesn't put much stock in the research, which executives believe was formulated based on a field of gate array vendors that, until recently, had done little to advance its products.
Earlier this year, AMI Semiconductor, LightSpeed Semiconductor, NEC Electronics, and Chip Express offered new twists on old gate array approaches using competitive, if not leading-edge, technologies.
"I think it says something when you have four companies all introducing array-based families, even though the data shows the market declining," McMinn said.
Considering the economics of a standard-cell ASIC, for volume requirements in the 200,000 to 500,000 range the Chip Express program looks "pretty compelling," said George Lauro, managing director of Wasserstein Ventures, Palo Alto, Calif., which led Chip Express' recent financing round.
"We see it as a mushrooming opportunity," Lauro said. "We talked to customers-some of the largest names you can think of-and they say they're going to continue buying this technology."
That's good news in the short run, analysts said.
"The question is, longer term, where is the gate array market going? Our sense is, it's certainly not going to grow," said Richard Wawrzyniak, an analyst at Semico Research Corp. in Irvine, Calif. "But just because a market isn't growing, it's not necessarily the end of the story for Chip Express or anybody."
Market stability needed
If suppliers keep moving products to tighter geometries to take advantage of performance gains, it's possible to stabilize the gate array market, and a strong contender could increase share at the expense of others, Wawrzyniak said.
"There's a need for this type of product," agreed Bryan Lewis, an analyst at Gartner Dataquest, San Jose. "I see some action out there that has the potential to slow the [revenue] decline."
Whether Chip Express' new business model will elevate the company to a new tier of suppliers or just maintain the status quo remains to be seen. But the privately held company claims it has already demonstrated positive results.
Doug Bailey, vice president of marketing, said in a recent interview that Chip Express' revenue declined 24% in the harsh 2001 market, compared with the overall semiconductor market decline of 32%. The company posted sales of $30 million in 2001.
Wasserstein's Lauro believes there's potential to grow to $300 million within a few years, and either take the company public or be acquired by a larger ASIC firm. "The market opportunity is huge, if they can execute," he said.