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