Forward Concepts

As you must know by now, the semiconductor market experienced its worst sump in history last year, with a decline of 33% in monolithic integrated circuit chips. And DSP was no exception, with negative growth for the first time in history. DSP chip shipments reported by semiconductor manufacturers to the World Semiconductor Trade Statistics (WSTS) organization totaled $4,256 million in 2001, representing a drop of 30.7% from year 2000 shipments.

DSP Market Shares

After many contacts and extensive interviews with the major DSP chip vendors, Forward Concepts has estimated 2001 market shares as follows:

PROGRAMMABLE DSP CHIP MARKET SHARES

Company	2000 Mkt Share	2001 Mkt Share	Y-Y Change
Texas Instruments	44.0%	43.5%	-0.5%
Agere Systems	22.8%	16.1%	-6.7%
Motorola	13.2%	12.0%	-1.2%
Analog Devices	10.2%	8.2%	-2.0%
Other	9.9%	20.2%	+10.3%
Total	100.0%	100.0%	N/A
DSP Shipments ($mil)	$6,142	$4,256	-$1,886

WSTS Mystery

Notice that �Other� in this table doubled in market share, while the major DSP vendors lost market share. From a revenue standpoint, �Other� increased by some +45% when the entire chip market was negative by over 30%, and the collective DSP market was also negative by over 30%. Since it strains credibility to believe that any chips increased in sales by 45% last year, something must have changed.

What has changed, it appears, is that the WSTS 2001 classification changed over the 2000 classification. We know that at the end of 2001 WSTS reclassified over $90 million of microcontrollers (MCUs) to the DSP category. But that�s not enough to account for the 45% revenue increase. By the rules of WSTS, they do not divulge which companies report into any given category. In fact, they won�t even confirm that TI reports into this category.

We suspect that at the beginning of 2001 one or more companies reclassified their product(s) from another category (perhaps from ASIC, or microperipherals, or even MCU) to the DSP category. We checked with most of the companies with revenues in DSP-centric chips big enough to account for the change, but have yet to learn which one(s) decided to change their chip classifications.

So, what does all this mean? It means that the DSP market actually dropped more than the 30.7% reported, and if we were to measure market share changes of the four major companies based on last year’s WSTS classification, their market share changes would be far less dramatic, with TI probably gaining (slightly) in market share.

What About 2002 and Beyond?

Forward Concepts is forecasting a moderate 15% increase in programmable DSP chip revenues this year, compared to a predicted overall monolithic IC market increase of 8%. Increasing cellular sales will lead the recovery, but a number of smaller markets are also doing better, too. Markets like digital cameras and MP3 decoders, for example. The MP3 decoder chips are finding sockets in a wide variety of products now, not just portable flash memory players. One can now find MP3 (and other Internet audio) decoders in jukeboxes, portable CD players, console CD players, car stereos, digital cameras, camcorders, PDAs, DVD players, and cellphones.

Wireline and telecom markets are not likely to improve until the second half of 2002, but we are forecasting a 33% DSP market jump in 2003, based on recovery of the telecom market and the replacement cellphone market that will increase sharply as new phones with added features for �3G lite� and GPRS reach volume shipments. Our current five-year forecast is presented below:

PROGRAMMABLE DSP CHIP MARKET

	'01	'02	'03	'04	'05	'06	CAGR
DSP Shipments ($mil)	$4,256	$4,894	$6,509	$8,527	$11,086	$14,189	27.2%

It is clear that wireless will continue to be the programmable DSP market driver over the forecast period; however, the market for �embedded� DSPs, found in a great variety of products, is an even bigger market that we will discuss in later market bulletins. DSP technology (in whatever form) is the only way you can get to the Internet: narrowband, broadband, or wireless. It is also the key to the emerging packet (IP) telephony market. And without DSP, there is no multimedia. So, DSP has become the technology driver for the entire semiconductor industry, but the programmable DSP chip market is just the most visible part.

Forward Concepts has added a registration capability to the website (www.forwardconcepts.com), but if you�re receiving this bulletin, you�re already in our database for future market bulletins and notification of new market studies, so there�s no need for you to register. Over the next few weeks you’ll be getting announcements of new studies and an invitation to participate in an online survey.

If you’d like to share your observations on DSP technology trends and the markets enabled by DSP, please feel free to contact me directly.

DSP MARKET BULLETIN

2001: A Year to Forget

DSP Market Shares

PROGRAMMABLE DSP CHIP MARKET SHARES

WSTS Mystery

What About 2002 and Beyond?

PROGRAMMABLE DSP CHIP MARKET

CAGR