Overview

Worldwide programmable DSP chip shipments for the year 2000 came in at just over $6.1 billion according to the World Semiconductor Trade Statistics (WSTS) organization. That represents a 40% growth over 1999 revenues of $4.4 billion. The entire monolithic integrated circuit industry was up by some 35%, so it appears that as DSP deployment becomes more widespread, the growth delta between the all ICs and DSPs becomes narrower. However, DSP shipments in 2000 passed those of the 8-bit microcontroller (MCU) market, the largest MCU market. And we predict that DSP shipments will eventually pass all of the MCU markets, collectively. But, as a high tide raises all ships, a low tide lowers all ships, too.

Market Forecast

There is clear softening in the global economy for the first half of 2001 and dramatic chip inventory adjustments which will severely impact Q1 and Q2 chip shipments, as OEMs use up the chips that they over-ordered last year. We have forecast a more conservative 5% revenue growth in monolithic IC shipments for 2001 and lowered our earlier DSP revenue growth forecast to the 10% level. The consensus among the chip executives we've interviewed is that IC shipments will continue their decline through late Q2, with recovery beginning in early- to mid-Q3 of 2001. Although the semiconductor industry is cyclical, we forecast a compound annual growth rate (CAGR) of 27% for DSP shipments through 2005, as indicated below:

The Major Players

In contrast to our gloomy forecast for 2001, DSP shipments were very good in 2000…at least until late in the fourth quarter. The company rankings remain the same for 2000, with TI still having a significant lead…but with a few points of its market share given up, mainly to "Other," followed by Analog Devices and Motorola.

Wireless revenue constitutes TI's biggest market, where growth was up only about 30%, dragging down overall company growth. However, TI, still maintains a 55% share of DSP shipments to the cellular handset market. After a slow start in ADSL, TI's shipments to that market were up nearly 900%, and their sales to the hot digital still camera market were up some 400%. DSPs for Internet access and Internet audio were both up over 300%. The company's sales growth for the hard disk drive market was down and chips for the analog modem market continued their predictable decline. Texas Instruments saw its greatest revenue increase (well over 70% growth) in the "mass market" or catalog and sales through distribution. That is, in effect, seeding the emerging markets for future volume "sockets."

Motorola's 61% increase in DSP shipments is primarily attributable to internal shipments to its cellular handset division, but merchant-market DSP shipments for both wired and wireless infrastructure were up significantly, too, at over 50%. Motorola DSPs continue to play well in the professional audio market, although it is only a single-digit percentage of their DSP revenues. The company is betting heavily on 2001 design-ins for their new StarCore-based DSPs for hefty 2002 revenues.

Analog Devices (ADI) also had a very good year, overall, with both wired and wireless communications sales up sharply. Their market share in 1999, however, has been restated from our earlier reports. ADI is the industry leader in DSP chip sales to the merchant (non-captive) ADSL market and the industry leader in universal (voice & modem) remote access server (RAS) modem banks based on DSP. The company's DSP division is benefiting strongly from pairing with their communication division's OthelloÔ direct conversion radio chip (based on DSP technology, but not categorized as a programmable DSP chip). The pairing has led to high-volume GSM cellular handset sockets at Samsung and future ones in Siemens 2.5G handsets. ADI has announced the introduction of the "Frio" low-power DSP core (developed jointly with Intel) into its product line, and we expect specific product announcements in Q2. Like TI, ADI experienced strong growth in their catalog and distribution markets, greater than 60% in 2000.

Lucent is spinning off its microelectronics division as a separate company, now named Agere Systems. Lucent microelectronics was the 1999 leader in DSP shipments for cellular infrastructure, and likely maintained its number-one ranking in 2000. Since the company is under a Securities Exchange Commission gag until 25 days after their initial public stock offering (IPO), we can say little more about their CY 2000 performance. However, after the IPO, Agere is likely to find a bigger market for its chip products, since most major telecommunications companies considered the parent company to be a direct competitor. Agere will likely emphasize the new StarCore IP in ASIC implementations for high-volume customers and for selected catalog products…the latter being a new market for their DSP properties.

The high growth of "Other" was a surprise. We suspect that is attributable mostly to Japanese DSP vendors like NEC and Hitachi selling to Japanese cellular handset makers, though both TI and Agere enjoy good business in that market. Another possibility is that some chip houses like STMicroelectronics and LSI Logic are now reporting some of their chips based on DSP cores as "programmable" DSP chips rather than as ASICs or "microperipherals," as they have in the past.

Hot DSP Markets

Digital wireless continues to fuel the majority of DSP market growth, with Nokia continuing to be the top DSP chip consumer, followed by Motorola and Ericsson. However, new markets in portable devices are coming on strong. Virtually every plug-in module for palmtop computers (PDAs) has a DSP chip in it. Those plug-in modules include MP3 players, GPS receivers, Bluetooth transceivers, and even cellular handset modules. So, there will likely be a convergence of the PDA and the cellular handset as handsets begin to add those same PDA capabilities.

To address that new version of convergence, TI has introduced its OMAP (Open Multimedia Applications Platform), which is basically an ARM RISC core on the same die as a C55x DSP core, with software support tools for the combo. The OMAP concept extends to coprocessor modules on the same die for Bluetooth, GPS, etc. Motorola has joined in the basic concept by licensing an ARM RISC core to pair with the company's existing M*Core RISC and DSP core pairing on a chip.

Newcomer to the DSP wireless chip market, Intel, has introduced a similar concept (though no chips, yet) that they call PCA (Personal Internet Client Architecture). We expect that Intel will announce an ASIC implementation for wireless handsets based on the "Frio" DSP core jointly developed with ADI and their XScaleÔ RISC core with the StrongArmÔ heritage. Palm, Inc. has announced that it is porting its Palm OSÔ to ARM, so, it appears that ARM cores (and their progeny) may have become the de facto platform for future PDA and multimedia functionality in future cellphones.

Internet Telephony has spawned many new markets, not only for VoIP gateways, but also for client products like IP phones and Integrated Access Devices (IADs, or client gateways), all of which use DSP chips. At the gateway level, look for a number of new DSP chips to be introduced which can handle many VoIP channels each. We define those chips as "Access Communications Processor" chips (ACPs), to differentiate them from traditional DSPs. Last year, PMC-Sierra purchased Malleable Semiconductor and Broadcom purchased Silicon Spice. Intel has just announced purchase of VxTel Inc., and all three startups had announced ACPs before they were acquired. Analog Devices, Motorola, and TI have also announced ACP implementations using their own DSP cores, so the VoIP media gateway market is getting interesting.

Since host-based software modems have become practical with GHz-class Pentiums, analog modem chips remain a growth market primarily in the remote access server (RAS) market, where banks of modems are employed by Internet service providers (ISPs). Increasingly, those RAS modems are becoming "universal" ports which can handle voice over Internet Protocol (VoIP) as well as V.90/V.92, fax and ISDN.

The Internet Audio download market, led by MP3, reached a sell-through level of 4 million units in 2000, but the market is expanding well beyond portable players into MP3 jukeboxes, CD players and even digital cameras and cellphones. The digital still camera market reached 10 million units in 2000, and application-specific DSPs addressing this market are now being shipped by traditional DSP houses.

Although the markets for DSP continue to proliferate, from digital hearing aids to motor control, two things make DSP the semiconductor technology driver for this decade: the Internet and multimedia. Without DSP, there would be no access to the Internet, wired or wireless. And the Internet is becoming the vehicle for unified messaging of audio, video, fax, and data, which is made possible through DSP. Without DSP, streaming video and MP3-type audio would be impossible. But, through DSP, our connected future will be a richer and more rewarding experience. Watch this space!

Will Strauss

wis@fwdconcepts.com

P.S. Your comments and observations are always welcome.

W.S.

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