Growing demand for fail-safe networks and storage systems is putting additional pressure on clock IC suppliers to deliver more complexity and performance.
While the pricing environment remains difficult, the clock IC market has been one of the few safe havens in the depressed semiconductor market.
Integrated Circuit Systems Inc. (ICS), a pure-play clock IC manufacturer, saw revenue grow 6% in its first fiscal quarter of 2003, ended in September, and 62% year-to-year.
Cypress Semiconductor Corp.'s clock IC business was "nicely profitable," said chief executive T.J. Rodgers, at a recent financial conference in San Francisco. The company's Timing Solutions Division earned about $3.5 million on revenue of approximately $40 million in the September quarter.
The communications sector is pushing clock complexity, but the lower-margin PC clock market still drives the highest volume. ICS, Valley Forge, Pa., derives 45% of its revenue from PC clocks. Although unit shipments have been robust, average selling prices (ASPs) of PC clocks are expected to decline another 3% in the December quarter, according to ICS chief executive Hock Tan.
Though they ship in the hundreds of millions of units each year, clock chips, which synchronize and distribute data signals throughout a system, are hardly commodity devices, and their complex analog circuitry has kept barriers high to potential new players.
"People think a clock is a simple beast: you put one in the system and then you're done," said Rick Reifer, director of marketing for timing technology at Cypress, San Jose. "It's a lot more involved than that."
Higher network data rates, faster processors and memory, and proliferating I/O standards are putting more demands on suppliers to meet rigorous speed, jitter, and skew specifications to keep high-performance and high-reliability systems operating without missing a beat.
Increasing memory bus speeds have given rise to a new clock chip segment in the past five years that now rivals in unit shipments the PC clock segment, according to Bill Birch, applications manager for timing solutions at Motorola Inc.'s Semiconductor Products Sector (SPS) in Chandler, Ariz.
The number of memory clocks per system is increasing dramatically as memory bus speeds accelerate, Birch said.
Indeed, the shift from single-data-rate to double-data-rate SDRAM in servers was behind a 4% revenue uptick in ICS' communications business in its September quarter.
"The level of bookings we're seeing [in the current quarter] will probably enable us to double or almost double revenue shipped into this segment from last quarter," Tan said.
ICS derives 45% of its revenue from sales of clocks into computing, 29% from communications, and 18% from digital consumer.
In a recent conference call discussing the company's earnings, Tan said the trend toward two clocks per PC--driven by white-box computer makers in Asia--is increasing clock IC unit shipments but dragging down ASPs and gross margins. He expects PC clock prices to drop about 3% this quarter.
Sizing the clock IC market is no easy task. Because competition is so fierce, suppliers rarely publicize precise revenue or unit shipment figures.
Cypress, recognized as the leading supplier of clock ICs by volume, estimates clocks for communications applications to be a $300 million to $400 million market, while computers and peripherals consume about $400 million worth of clocks. Programmable clocks--designed to replace crystals--generate about $200 million in revenue.
Motorola SPS claims a 15% to 20% share of the clock driver IC market, a subsegment of the system clock IC market. System clocks, SPS figures, will be a $500 million to $700 million market this year.
Dealing with redundancy
Agere Systems Inc., Allentown, Pa., which declined to break out its clock revenue, estimates the market for clock driver ICs will grow from $320 million in 2001 to $460 million in 2005, as communications systems put ever higher demands on clock technology, such as redundancy.
Last month, Motorola SPS released its first family of "intelligent" dynamic clock driver ICs to address the need for redundant system timing.
"It used to be just in telecom equipment and high-end servers that you would find redundant clocks and fail-safe systems," Birch said. "Now you're seeing servers that hold Web information and data storage systems that must have high reliability. OEMs have been putting in redundant boards and processors, and they want redundant timing signals as well."
Previously, OEMs would put dedicated logic for this function in an FPGA or ASIC, but there were performance or reliability compromises associated with that approach, Birch said.
"The intelligent clocks solve that problem elegantly by building the smarts of how to do [failure detection and auto-switching] into the clock itself," Birch said. In the process, the devices free pins on the ASIC or FPGA for other functions, he added.
SPS estimates the market for redundant clocks to be less than 10% of the system clock IC market, though it's expected to grow significantly as demand for high-availability systems expands from telecommunications and high-end servers into routers and low-end servers, Birch said.
Just as OEMs are leaning more toward backup systems, backup supply is also growing in importance. Customers are increasingly asking for second sources, though suppliers said it's not easy to comply.
"Because there's a strong analog component to it, it's difficult to make an exact drop-in replacement for a clock from another manufacturer," Birch said. "The question of alternative supply sources is still of secondary importance. First is finding a solution that works. But the trend is in that direction."
Agere is heeding the call. Having supplied custom clocks for three years to many of its ASIC customers, in September the company expanded its clock driver portfolio to include second sources for parts from Cypress and SPS.
Agere's strategy is to improve on the products it is duplicating while driving down price.
"Customers are consolidating vendors, looking for multiple sources and for lower prices," said Cindy Genther, director of marketing for Agere's networking IC business. "What we did was develop a set of products in a process technology that allowed us to have faster speeds and better jitter performance, and address customer requirements to move to lower system operating voltages."
The devices, she said, were the first to support dual voltages of 3.5 and 2.5V, but were pin-compatible with single-voltage parts from other suppliers.