Hanging up on analog and flexing Wireless/DSP muscles

In Will Strauss' regular Forward Thinking column, he discusses hanging up on wireless, pumping up InterDigital, putting VeriSilicon back on the radar screen, and improving on DSP shipments, as well as other DSP changes.

Say goodbye to analog cellular

As of February 18, 2008, the two largest U.S. carriers, AT&T and Verizon, will cease analog service.On that date, the Federal Communications Commission will no longer require carriers to offer analog service. The carrier most likely to be affected by this evolutionary change is Alltel, who are shutting down their analog systems in phases with completion planned toward the end of 2008. Although only about a million cell phones will be immediately affected, many home alarms and vehicle-assistance systems, like GM's OnStar service in vehicles older than model year 2004, will become inoperable.

InterDigital continues to pump up

As I pointed out in earlier Market Bulletins, InterDigital are one of the primary developers of CDMA technology. On December 21, the company announced that the English high court issued a judgment finding that European patent (UK) 0,515,610 (known as the '610 patent), owned by InterDigital Technology Corporation, is essential to ETSIís 3G UMTS WCDMA European standard. The '610 patent relates to open loop power control, a fundamental aspect of 3G technology. The ruling was in response to earlier litigation by Nokia.

Earlier in December, the company announced successful initial evaluation tests of their UMTS/HSPA chip with ìa leading mobile device manufacturer.î So, it appears that InterDigital are continuing to flex those technology muscles. The ASIC chip boasts data speeds of up to 7.2 Mbps in the downlink and 1.5 Mbps in the uplink. The company's advanced receiver features diversity to assure better interference mitigation, resulting in high data speeds and better coverage, especially at the cell edge. Unlike other basebands, InterDigital's WCDMA baseband is not based on a DSP core. Rather, it is based on a high-end ARM RISC core with innovative hardware accelerators, voltage islands, and clock gating techniques for maximum battery life.

General chip sampling is slated for early 2008, and a complete reference design is available. Realizing that early penetration into the top handset makers is a challenge for a chip newcomer, the company's initial target market is data cards.

VeriSilicon: back on the radar screen

After Shanghai-based VeriSilicon Holdings purchased the ZSP licensable DSP product line from (then) LSI Logic in July 2006, they pretty much fell off of my personal radar screen. The original ZSP architecture was the first DSP based on a superscalar (rather than Harvard) architecture, and evolved over two generations before the sale to VeriSilicon. Although the worthy ZSP IP has been licensed to some substantial chip companies like Broadcom, Yamaha, JVC, and Huawei, the product line was unprofitable under LSI. Now, however, things are looking up for ZSP.

This week, VeriSilicon introduced an aggressive third-generation 65 nm product (the Quad-MAC, 6-ALU ZSP-800) with probably the most extensive HD audio support available and a complete optimized suite of required and optional software codecs through their VZ.Audio HD platform. They say ìthe third timeís the charm,îand we'll be watching.

DSP shipments improve

Last November DSP chip shipments were up a modest 2.5 percent in revenue terms, with cellular DSP (mostly baseband chips) up 6 percent. But December 2007 shipments, in my opinion, look to be even better, boosting quarterly shipments up an estimated 4.8 percent, as illustrated in Figures 1 and 2. Consequently, I believe that shipments for the year will be down only 5 percent to the $7.9 billion level, compared to my earlier, more pessimistic forecast of -9 percent for all of 2007.

Figure 1
(Click graphic to zoom by 1.3x)

Figure 2

The Multipurpose shipment increase pictured in the two figures is largely attributable to video applications, like Texas Instruments' DaVinci line of chips. Computer is primarily DSP for HDD controllers, and Wireless is mostly for cell phones, which has seen a late-season improvement. Wireline continues to be lackluster, while Automotive and Consumer shipment shortfalls appear to be short-term situations.

DSP shipment reporting changes

I expect significant changes in DSP chip reporting beginning in 2008, likely forcing Forward Concepts to modify its way of estimating DSP market shares. Several companies that have previously reported their products as ìDSP chipsî will likely now report them as ìASICs,î under subcategories of wireline, cellular, computer, and so forth. In short, DSP silicon is losing their identity as a separate DSP chip category.

For example, Agere Systems, which was first acquired by LSI Computer for their (DSP-based) Hard Disk Drive (HDD) controller line, had their (DSP-based) cellular operations acquired by Infineon. Infineon has no catalog DSP chips in their portfolio and has long reported their DSP-based silicon (mostly as cellular basebands) as ASICs. Consequently, absorbing the Agere wireless product line (previously reported as DSP chips) will likely result in zero DSP chips being reported by Infineon in the future. Added to this, LSI Computer may report shipments of their now-substantial HDD chip line as ASICs.

Then there is MediaTekís acquisition of Analog Devices' cellular product line. DSP shipments from that product line will no longer be including ADI's finances, and MediaTek will likely report those products as ASICs as well. The net result will likely be a diminished size of the reported DSP chip market, and an increase in the market sectors of DSP, ASIC cellular, ASIC computer, ASIC wireline, and so on.However, the overall DSP silicon shipments will continue to increase because without DSP technology there would be no digital wireless, no digital multimedia, no VoIP, or HDTV. Iíll brief you more on these changes later this quarter.

New shameless plugs

Forward Concepts' newest market study, ìWiMAX '08: The 3G+ Broadband Alternative,î is now available. The 300-page report is an in-depth analysis of operators, equipment, chips, and broadband alternatives, both wired and wireless. Detailed equipment and chip forecasts by type are presented through 2012. WiMAX/BWA system houses are covered with cumulative revenue estimates and 2007 market shares. WiMAX PHY, MAC, RF, and Communications Processor chip vendors are also profiled with estimated 2007 market shares. Broadband alternatives, both wired and wireless, are examined, including Cable, ADSL, UMTS, HSPA, UMB, and LTE. Global WiMAX and BWA deployments by 194 operators in 73 countries are profiled and detailed listings of wired and wireless broadband subscriber populations on a country-by-country basis are presented for 146 countries. Details are at: www.fwdconcepts.com/WiMAX8.htm.

Forward Conceptsí annual market study, ìCellular Handset & Chip Markets '07,î is the most comprehensive cellular handset and chip market study now available. Published in June 2007, the report is an in-depth analysis of the top 37 handset makers and provides market sizes and vendor market shares for handsets by air interface and for virtually all integrated circuits that go into a cell phone, including basebands, transceivers, power amplifiers, application processors, and memory of all types. Subscriber and handset forecasts by air interface for each global region are also provided in the 370-page study. Details are at: http://www.fwdconcepts.com/cell7.htm.

As always, I invite your comments.

Will Strauss
President & Principal Analyst
Forward Concepts