A new semiconductor industry is on the horizon. Chip makers are adopting a less-insular approach, reaching out to customers, software vendors and competitors. As evidence of this, almost every major chip maker has reorganized its business along customer- or market-focused lines within the past two years. Like the banking industry, chip companies are forming partnerships and strategic alliances at record rates. Motorola SPS itself made key alliances in 1998, including agreements with Advanced Micro Devices, Lucent Technologies, Siemens, Starfish and Sun Microsystems.

The varying degrees of success that semiconductor companies have in implementing this new, outward-looking approach will eventually separate chip suppliers into two tiers. The top tier will provide high-growth, high-margin, value-added systems of silicon and software; the others will deal in low-growth, price-sensitive commodity devices.

Every major chip maker wants to be in that top tier of suppliers, and each has a plan for getting there. As chip companies emerge from this downturn, the industry will become more segmented. Through streamlining, top-tier chip makers will become more flexible and efficient. They will focus on honing formidable core competencies in targeted market segments. While chip companies become more specialized, the range of semiconductor-enriched applications will expand.

With the telecommunications, computer and cable industries converging, fresh IP and unconventional chips will be needed to power whole new classes of products. And with Internet usage doubling about every 100 days worldwide-with dramatic leaps in e-commerce-the demand for new classes of semiconductors will skyrocket. Motorola also sees the appetite for digital signal processing (DSP), networking and communications equipment and chips for all things wireless to be extremely promising. We also see strong growth in the infrastructure and consumer-electronics markets-from GPS to HDTV.

I also see essential ingredients at the IP and system level as playing a critical role for the top-tier chip makers of tomorrow.

- Leverage a large and portable IP library. Developing a vast, easy-to-use IP library is the only way chip makers can create the feature-rich silicon that customers need to produce the innovative products that consumers want.

- Expand system-level design expertise.

- Drive system software and services capabilities. Fusing software with silicon allows for "smarter" products. With the limitless wireless world, integrating Java and other enabling software suites will be valuable.

When the reinvigorated semiconductor market dawns, we're prepared to greet it with enthusiasm and confidence.

- Hector Ruiz is president of Motorola Inc.'s Semiconductor Products Sector.