Forward Concepts projects growth of 40 percent in programmable DSP chip shipments for 2000 compared with just a little more than 20 percent growth forecast for the overall semiconductor market.

Digital wireless continues to drive the market for DSP chips. According to DSP chip market leader Texas Instruments Inc., some 435 million handsets will ship in 2000, a 60 percent increase over last year. The surprising aspect of this spectacular growth is that fully half of the handsets being shipped are replacement units. So, forecasting the handset market solely on the basis of population penetration has led analysts to continuously underestimate this market. Forward Concepts is no exception. Although we have been including replacement units in our wireless forecasts for several years, our replacement estimates were in the range of 10 percent to 15 percent of shipments.

We don't feel too badly about our projections, though, since nearly every market researcher on the planet has underforecast the enormity of the replacement market-a market driven by nonstop promotions for newer, lighter, longer-talking handsets and ever-cheaper "basket" cellular payment plans. By 2003, the replacement market is expected to represent 65 percent of all cellular handset shipments.

But the cellular infrastructure market is growing too. Not only are traditional second-generation (2G) basestations shipping in the thousands every quarter, but new (2.5G) basestations for new packet voice and data services are now shipping by the hundreds every quarter.

Each basestation may contain hundreds of high-performance (and higher-margin) DSP chips, so the wireless infrastructure is a very important market. 2.5G services like general packet radio service, enhanced data rates for GSM evolution and Qualcomm's High-Speed Data promise high-speed Internet access at speeds beginning at 115 kbits/second and moving up to 384-kbits/s, speeds higher than today's dial-up modems can deliver. And all of this is in advance of the much-heralded 3G or third-generation cellular service, which promises data speeds of up to 2 Mbits/s for stationary wireless services.

The market for DSPs in hard-disk drives is growing, too, albeit at only a double-digit revenue pace in 2000. The modest growth is due to increasing chip integration, with MCU, read-channel and DSP servo control functions rapidly moving to a single-chip solution. However, we see prices firming up as chip functionality increases. Further, the personal video recorder (PVR) capability is growing more popular and is being incorporated into set-top boxes, helping the HDD market to grow beyond the traditional computer market. Texas Instruments, Lucent Technologies, Cirrus Logic and STMicroelectronics are the primary players in the DSP segment of the HDD market. With close to 200 million HDDs shipping this year, it's not a market to be ignored.

Meanwhile, traditional modem DSP chip revenues continue to shrink under both severe price pressure and the trend toward host-based modems.

Host-based modems became inevitable as PCs passed the 500-MHz mark. When host-based modem data pumps (the DSP functions) were first introduced at the 133-MHz level, they consumed fully half of the host processor's available cycles, even at 28.8 kbits/s. At 600 MHz, the load for a V.90 (56-kbits/s) data pump is around 10 percent, so the handwriting is on the wall.

The market for host-based modems will approach 40 million ports in 2000, or almost half of all V.90 ports. Conexant, Motorola, PC-Tel and Smart-Link dominate the host-based modem market, where the silicon content is largely confined to the data-access arrangement and a linear codec. However, remote-access-server modem banks for Internet service providers and the like are still a growing, profitable DSP market, with Conexant, TI, Analog Devices and Lucent the major players in that market segment.

Meanwhile, ADSL is finally becoming a hot market for DSP technology, now that the telephone companies have finally realized cable companies providing broadband Internet access to the home were eclipsing them and that they could actually make a profit by selling new services enabled through DSL.
In addition, xDSL service providers like Rhythms and Covad have become very aggressive. From a systems standpoint, Alcatel is the clear market leader, boasting the majority of central office installations. Alcatel's ADSL modems include DSP data pumps manufactured by LSI Logic and STMicroelectronics. Analog Devices is the clear winner in ADSL chip-design wins, having shipped more than a million chip sets to more than a dozen system houses last year. Other major chip suppliers include Conexant, Globespan, Lucent and TI. However, new entrants to this market include Ambient/Intel, AMD, Centillium, Excess Bandwidth, ITeX, Motorola, NEC and Virata. Massana Ltd. has introduced an ADSL DSP coprocessor core that can be paired with traditional RISC cores for companies wanting to design their own DSL-based products, like voice-over-Internet Protocol client gateways.

Getting less print than other DSL modems are symmetric DSL and HDSL types. Both employ nonprogrammable DSP-based data pumps. The market for SDSL, which provides 764 kbits/s and higher over a single copper pair, has belonged almost exclusively to Conexant, with European sales a significant part of its shipments. HDSL, which provides T1 (1.544-Mbits/s) rates over two copper pairs, has been confined to modems used by the phone companies and competitive local exchange carriers (Clecs) and is a merchant chip market for companies like Level One Communications/Intel and Metalink. Modem houses like Adtran, Orckit and Pairgain have employed their own custom chip designs as well. HDSL-2 chips, which provide T1 data rates over a single copper pair, are now beginning to ship in volume, although it is likely that the proposed G.shdsl standard, which has a multirate capability, will be favored by phone companies and Clecs and may someday supplant all SDSL and HDSL sales. Annual shipments of SDSL and HDSL modems are in the single-digit millions, but are far more profitable chips than the more visible ADSL or V.90 modems.

The infant market of DSP industrial and ac motor control is projected to increase some 800 percent this year, moving from an estimated 1 million chips last year to some 8 million units this year. Major users of those DSP chips include Electrolux, the world's largest white goods manufacturer, and Emerson Electric, the world's largest manufacturer of ac electric motors. In white goods, DSP compressor control has been popular in Japan where companies like Sanyo can offer low-noise refrigerators suited to their environment. Emerson employs DSP in its Commander industrial control units for vector control. Analog Devices continues to lead this DSP market segment, followed by Texas Instruments and Motorola.

An exciting long-term DSP growth market is Internet telephony. It's clear there will be dozens of startups, IPOs, acquisitions and mergers in the Internet telephony segment this year-in chips, software, systems and services-and DSP is a pivotal component of this market.

Ultimately, the packet voice market for DSP will rival the size of DSP for wireless, as the worldwide circuit-switched telephone network moves to packet-switched technology. Packet technology provides the basic mechanism for the unified messaging of voice, video and data-a capability that someday will make today's Internet look as primitive as the e-mailcentric Internet before the World Wide Web and Web browsers. That progress will be due in large measure to advances in DSP technology.