SAN FRANCISCO -- The year-and-a-half slump in communications markets is causing a sea of change in the industry, prompting systems houses to shift product development strategies from proprietary ASIC designs to standard ICs and a "modular infrastructure" business model, said Intel Corp.'s top networking executive during briefing with journalists on Monday evening.
"The industry has changed," noted Sean Maloney, executive vice president and general manager of Intel's Communications Group. "The market is moving from ASICs to more pre-fabricated building blocks," said the executive, who is scheduled to repeat those remarks in a speech today at the Intel Developer Forum in San Francisco.
Speaking to the small group of journalists, Maloney noted that until recently, Cisco Systems Inc. and other networking equipment leaders were hard at work developing custom ASICs for their systems, but these proprietary integrated circuits are too costly, time consuming, and difficult to design, Maloney said.
Intel--which is not a major player at all in ASICs--along with other networking ICs suppliers are now rapidly adjusting new strategies to intersect communications systems manufacturers at a new crossroads in product development. The Santa Clara, Calif.-based microprocessor giant, which built most of its fortune on the PC movement, is calling the strategy shift in communications markets a new "modular infrastructure" model.
By deploying a "modular infrastructure" model, systems houses are being forced to procure more merchant "building blocks" like boards and chips from suppliers to reduce costs, Maloney reasoned, while rehearsing his keynote speech lines with the group of journalists on Monday evening.
Moreover, communications system houses have no choice but to make this shift, Maloney stated. "It's obviously been a crummy year for everybody," he noted. "Most of our customers have laid off half of their R&D staff."
But the shift towards standard building blocks in communications networking systems is far different than the dynamics in the fast-changing PC market, in which is mastered by Intel. "The 'commodization' of communications ICs will not happen anytime soon," he cautioned.
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