After coming off a strong second half to finish 26 percent over the previous year, DSP shipments in 2003 returned to the $6.1 billion level of record year 2000. That growth was driven by only two major DSP application areas: wireless and consumer electronics. Wireless increased some 32 percent to $4.2 billion, while consumer grew 108 percent to $650 million. Clearly, wireless is the principal underpinning of the DSP market.

Coincident with these increases, shipments to the Japanese market showed the greatest regional change. With DSP shipments to Japan increasing some 64 percent over the previous year, there appears to be a natural tie-in between Japan's return to financial health and the increase in consumer and wireless DSP shipments.

The pattern in 2004 is more evenly distributed among the several application areas, but with wireless and consumer growth essentially flat in the first quarter compared to the fourth quarter of 2003 — yet at essentially the same high levels. The computer and peripherals segment (mostly disk drive controllers and imaging processors) has had a healthy rebound, increasing 70 percent over the previous quarter, and automotive (mostly dashboard electronics) increasing 24 percent. The only negative for the first quarter has been the 17 percent drop in so-called multipurpose DSPs, consisting mostly of higher-priced chips sold in smaller quantities through catalog and distribution channels. Since both wireless and consumer have strong seasonal demands, we expect them to be the growth drivers for the second half of 2004. However, video and imaging applications are growing quite strongly ("white hot," was one company's description) and, depending on how they are reported by individual chip companies, will also have an impact on wireless, consumer and computer peripheral segments this year.

From a company standpoint, Texas Instruments Inc. increased its DSP market share again last year, growing almost 40 percent to the $2.9 billion level. Clearly, TI's dominant position in the cell phone market paid off. The year 2003 saw struggling Agere Systems Inc. regain its No. 2 market position by growing 19 percent in shipments to garner a 13 percent market share. Motorola SPS, now Freescale Semiconductor Inc., had a poor year, with shipments slipping some 8 percent, garnering a 10 percent DSP market share. Since its DSP shipments have been heavily dependent on the parent company's cell phone shipments, it has someone else to blame. Now, as Freescale Semiconductor, it may have a better chance of selling baseband DSPs to Motorola's competitors. Analog Devices had a good year, growing DSP shipments some 34 percent on a smaller base, retaining a 9.5 percent market share. Other companies shipping programmable DSPs collectively grew some 23 percent, hanging on to a 19 percent market share.

For the programmable DSP chip market, Forward Concepts is forecasting 25 percent growth for 2004 to the $7.7 billion market and continuing at a 22.2 percent compound annual growth rate to the $16.7 billion level in 2008.

Seldom discussed in explicit terms is the "embedded" DSP market, which is almost twice as large as the programmable DSP market. The problem is that many chips based on DSP technology, but programmed for, or targeted to, a specific product are reported as something else. For example, V.92 modem chips from Conexant are special-purpose DSPs, but are reported to the World Semiconductor Trade Statistics organization as "MOS Special Purpose Logic and Microperipherials" in the "communications" subcategory. Infineon Technologies AG, the third-largest supplier of DSP baseband chips for the worldwide cellular market (following Texas Instruments Inc. and Qualcomm Inc.), reports zero DSP shipments for that application or for its substantial telecom chip product line. Rather, it reports all of its DSP-based chips as "ASICs."

Not to be left out in the data processing world, virtually all microprocessors have added a DSP capability, either through the addition of a multiplier-accumulator (a circuit required for most DSP algorithms) or a single-instruction, multiple-data (SIMD) circuit such as Intel's MMX and SSE II (Streaming SIMD Extensions). And then there are myriad nonprogrammable products based on hardwired DSP algorithms, like virtually any JPEG or MPEG device. Increasingly, just as more and more software applications seem to ship with every new Microsoft Windows product, more and more DSP "engines" are shipping in a great number of new system-on-chip devices with non-DSP names — like DVD controllers, A/V receivers, set-top boxes, cell phone application processors, digital cameras, HDTV and so on.

The message: DSP has become the technology driver for the entire semiconductor industry.

Will Strauss is president of DSP market research firm Forward Concepts Co.(www.fwdconcepts.com); Tempe, Ariz.