Relatively fragmented in the 1990s, the ASIC market now comprises a handful of top-tier providers, a generally struggling middle tier, and smaller companies consisting of startups and established application specialists. This
consolidation will continue, as application-focused vendors pick up market share at the expense of vendors stuck in an older model where
raw technology was king and could be used to address a wide
spectrum of applications.
Those days are long past, and they're unlikely to return.
Application-focused companies such as Texas Instruments
(wireless) and IBM (data processing and, increasingly, consumer) dominate the ASIC market share rankings. In the top
10, only STMicroelectronics can be considered to be successful in a broad range of application areas.
Larger events, such as LSI Logic's acquisition of Agere, also continue to drive the
industry consolidation. Still, the combination of the companies' portfolios—LSI's
storage and consumer with Agere's storage, wired, and mobile communications—
may result in a newly defocused company
that goes against the current wisdom of a
targeted product approach.
MARKET CHANGES
Structured ASICs, the darling of the early part of the decade, have fallen far short of the early and extremely over-optimistic expectations that had many analysts predicting a market
of well over $1 billion by 2008. Perhaps a much more cautious
view of the market is more appropriate, as it takes time for
designs—even when turned quickly—to generate meaningful production revenue.
Subsequent forecasts of a structured ASIC market growing to
almost $400 million in 2008 will need to be revised to a range of
$200 million or less. Both LSI Logic and NEC Electronics have
pulled out of the market in the past year, and Fujitsu is rumored
to be struggling to gain traction with its product. Only Altera
seems to be generating sizable revenue in this space, as its
HardCopy product is a solid adjunct to its FPGA lineup.
As it has been for over half a decade, the programmable logic
device (PLD) space in 2007 will be a see-saw struggle between
the two industry heavyweights, Xilinx and Altera. They control
over 83% of the PLD market, and that percentage has been
growing steadily. Lattice Semiconductor has been the primary
donor of this market share over the past several years, though in
2006 the company did regain some lost ground.
Overall, Lattice revenues have slumped despite the acquisition
of both Vantis and of Agere's FPGA line in the past eight years.
Lattice has now come out with a solid line of FPGAs, but whether
this will enable a continued turnaround remains to be seen.
Growth in the PLD space is forecast to be among the strongest
in the semiconductor space through the end of the decade.
These products not only enjoy growth along with the rest of the
industry, they also continue to make
inroads into areas traditionally held by
ASICs. With each new process generation,
more designers of systems that previously
couldn't use FPGAs due to performance,
integration, or power considerations can at
least consider using these devices.
Over time, more of these systems on
the margin will be able to shift to a programmable solution and will drive the
above-market growth rates. This growth
won't necessarily be monotonic, though,
as the fourth quarter results from Xilinx
and Altera have shown. Both companies
also forecast a decline in revenue in current quarter. But in the long term, prospects for this segment
are quite positive.
ASICs LOOK GOOD
This will be a strong year for ASICs
in particular, but not all vendors will share in the good fortune.
Video game consoles, with the long-awaited arrival of the Sony
PlayStation 3 and the Nintendo Wii, will consume upwards of
$1 billion in ASICs (when the controller chip is included as well;
though we categorize these as application-specific microprocessors, they are equally ASICs).
A recent teardown of the PS3 shows well over $200 in ASIC
and application-specific microprocessor unit content in each
box. PLDs won't enjoy any such blockbuster application to
drive growth, though. But they will need to be content with yet
another "ho-hum" year of growth approaching if not surpassing double digits.