gartner dataquest semiconductor industry and market outlook, 2q03 welcome!

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Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

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Page 1: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Gartner DataquestSemiconductor Industry and Market Outlook, 2Q03

Welcome!

Page 2: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Semiconductor Industryand Market Outlook, 2Q03Session 1

Jeremey Donovan and James Hines

Page 3: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Semiconductor Device Forecast Update, 2Q03

Session 1 Agenda

Semiconductor MarketOutlook in 2003 ..……………… Jeremey Donovan

Fab Capacityand Utilization ..……………………… James Hines

Page 4: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Semiconductor Market Outlook in 2003

Jeremey DonovanVice President

Page 5: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Key Issues

1. How is the business outlook for the semiconductor industry changing?

2. How are the application markets for semiconductors evolving?

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 6: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

2003 forecast almost unchanged from the 15 February update (was 8.9%, now 8.3%)

2003 cellular phone production revised upward from 434 million to 440 million units

Mild 2003-2004 downward revision to PC forecast; mild 2005-2007 upward revision

Downward revision to DRAM forecast

Forecast Update: Essentially No Change

0

25

50

75

100

125

150

175

200

225

250

275

2002 2003 2004 2005 2006 2007

Automotive (12% CAGR)

Communications (13% CAGR)

Consumer (12% CAGR)

Data Processing (8% CAGR)

Industrial (9% CAGR)

Military/Aerospace (5% CAGR)

Note: Percentages are CAGRs for 2002 through 2007.

Worldwide Semiconductor TAM ($B)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 7: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Supply Outlook: Semiconductor Inventory

Dataquest Semiconductor Inventory Index (DASI)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03

Let the good times roll …

Excess Inventory Peak

It couldn’t last forever …

Back to Normal

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 8: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Supply Outlook:Semiconductor Inventory

Consumer OEM

Wireless Comm. OEM

Wired Comm. OEM

Storage OEM

Compute OEM

Auto OEM

EMS/CEM

Semi. Distribution

Semiconductor Vendors

Total Industry

TrendHealth

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 9: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Supply Outlook:Average Selling Prices

ASSP

ASIC

Optoelectronics

Discrete

Analog

FPGA

MPU/MCU/DSP

Memory

Total Industry

TrendHealth

ASPs are mostly a function of capacity and competition.© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 10: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Business Outlook: IDM vs. Fabless

Clusters of fabless companies will compete in noncommodity markets Clusters of IDMs will compete in commodity markets Given a lower-cost structure, IDMs are likely to win when IDMs and fabless

IC companies compete in a product category IDMs will be more successful in markets with weak "intangible lock-in"

Fabless IDM

IP Defense Low-Cost Offense

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 11: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Digital is still hot!

Massive analog to digital TV shift starts in 2004, driven by low-cost DTV silicon

Disruptive/Emerging Opportunities:

Hi-Fi and stand-alone CD yielding to recordable DVD with Windows Media/MP3/SACD/DVD-Audio

UPnP in the living room

Media gateways make TVs a peripheral of the PC

Demand Outlook: Consumer Electronics

0

5

10

15

20

25

30

35

40

45

50

2002 2003 2004 2005 2006 2007

Analog (1% CAGR) Digital (16% CAGR)

Note: Percentages are CAGRs for 2002 through 2007.

Worldwide Consumer Semi. TAM ($B)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 12: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Transition from CRT to LCD monitors

WLAN may fuel consumer PC purchases

Reduced outlook for PC sales in 2003 as PC upgrade cycle delayed

Disruptive/Emerging Opportunities:

SATA transition begins with Springdale

Dell's impact on the printer market

Enterprise PC market driven by

– Productivity, security and TCO

64-bit CPUs in the enterprise

Demand Outlook: Data Processing

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007

Storage (6% CAGR) PCs (7% CAGR)

Others (10% CAGR)

Note: Percentages are CAGRs for 2002 through 2007.

Worldwide Data Proc. Semi. TAM ($B)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 13: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

No single dominant growth driver

China emerging as an important market for auto sales and production

Disruptive/Emerging Opportunities:

Adoption of telematics and GPS

New exhaust emission legislation in Europe (Euro IV) and United States (LEV II) driving growth in ECU

Mandatory smart air bag systems in United States starting in 2003, which will drive growth of image and position sensors

Demand Outlook: Automotive Electronics

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007

Remote/Keyless EntryOther AutomotiveGPS Navigation SystemsEngine Control UnitsDashboard Instrument ClusterClimate Control UnitAuto StereoAntilock Braking SystemAir Bags

Worldwide Automotive Semi. TAM ($B)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 14: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Wireless– Economic and financial climate

continues to hold back 3G infrastructure market

– Mobile voice and data will exceed voice-only by 2004

Wired– Massive reduction in optical

component supply base– Gigabit Ethernet earns its wings

Emerging/Disruptive Opportunities: Wired

– ADSL2+ Wireless

– Shift of handset production to Asia/Pacific

– Intel’s 50M transistor theory– Wireless LAN and the Centrino effect

Demand Outlook: Communications

0

10

20

30

40

50

60

70

2002 2003 2004 2005 2006 2007

Wired (11% CAGR) Wireless (14% CAGR)

Note: Percentages are CAGRs for 2002 through 2007.

Worldwide Comm. Semi. TAM ($B)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 15: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Conclusion:Tech Is Not Tapped Out

Same old, same oldMilitary/Aerospace

RFID supply chain revolution/aging populationIndustrial/Medical

Just two words … digital TVConsumer

Mostly driven by upgrade cycle; some emerging marketCompute

Audio is done, but here comes videoStorage

Growth in location-based services, in video and in dataWireless Comm.

Massive broadband growth, but massive problems stillWired Communications

Unprecedented explosion in automotive electronicsAutomotive

CommentVertical

Let’s look by vertical market

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 16: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Fab Capacity and Utilization:Triggers for Capital Spending

James HinesPrincipal Analyst

Page 17: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Fab Capacity and Utilization:Key Issues

1. How will capacity and utilization change to meet growth in demand?

2. What role will foundries play in the recovery?

3. What is the outlook for capital equipment spending?

Page 18: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Semiconductor Supply:Shifting From Inventory to Production

Unit Demand Improving– Package units shipped by year-end will exceed 2000

peak level– Silicon consumption increasing

Inventories Approaching Normal Level– Consuming excess inventories for past two years

Growing Demand Must Now Be Met by More Production– Increasing utilization of existing capacity– Ramp-up of new fab capacity

Page 19: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Worldwide Silicon Consumption Increasing

0

200

400

600

800

1,000

1,200

1,400

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

Millions of Square Inches of Silicon

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 20: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Increasing Utilization of Existing Capacity

Ratio of Silicon Consumed to Fab Capacity

40%

50%

60%

70%

80%

90%

100%

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

Leading-Edge

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 21: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

0

5

10

15

20

25

30

35

40

45

50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

300 mm

Non-300 mm

Number of New Fabs Starting Production

New Fabs in Place for Capacity Ramp-Up

24 2327

12

6

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 22: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Worldwide Wafer Fab Capacity

Capacity Growth on HoldSince 2000

– Two years of spending cuts– Attrition of older fabs

Slow Ramp-Up in 2003– Cautious investment

in 2003– Partially equipped fabs

in place Expansion in 2004 and 2005

– New fab projects – 300 mm drives growth

Fab Capacity Expansion Building Slowly

0

200

400

600

800

1,000

1,200

1,400

2000 2001 2002 2003 2004 2005 2006 2007

100 mm and Below 125 mm

150 mm 200 mm

300 mm

Millions of Square Inches of Silicon/Quarter

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 23: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Foundries Are Recovering

Foundries Have Been Hit Hard– Capacity utilization fell to nearly 40 percent in 2001– Prices and margins are under pressure

Wafer Demand Is Starting to Return– Wafer shipments are up 2 percent to 3 percent in

first quarter– Demand for leading-edge processes is strong– Forecast foundry revenue growth of 23 percent in 2003

Foundries Will Be Cautious on Capital Spending– Must manage profit vs. capacity expansion– Will modulate capacity ramp-up to keep pace

with demand

Page 24: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Foundry Fab Capacity Utilization

Ratio of Silicon Consumed to Fab Capacity

40%

50%

60%

70%

80%

90%

100%

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

Leading-Edge

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 25: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Optimistic PessimisticMost Likely

3

4

5

6

7

8

9

10

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

Billions of Dollars2002

- -31.5%

Scenarios (Probability)

OptimisticMost LikelyPessimistic

2003

+16% (0.25) +8% (0.55) +1% (0.20)

Wafer Fab Equipment Market Forecast: Return to Growth in 2003

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 26: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

What's Hot and What's Not in 2003?Selected Wafer Fab Equipment Segments

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

ECD

Steppers

2003 Growth

2003 Revenue (Millions of Dollars)

Market GrowthTrack Dry EtchCMP Nontube

CVDPVD

Diffusion

RTP Implant

Process ControlWet

CleanFactory Automation

193-nm Steppers [~100%]

E- Beam Mask Lithography

0%

20%

40%

50%

60%

30%

10%

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 27: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

0

5

10

15

20

25

30

35

40

45

1999 2001 2003 2005 2007

Billions of Dollars

0

10

20

30

40

50

60

70

1999 2001 2003 2005 2007

Capital Spending

Billions of Dollars

Semiconductor Equipment(Excluding Test)

Silicon Cycle Continues:Capital Equipment Boom in 2004 and 2005

<Client Name> | <Title> | Engagement: <xxxxxxxxx> | <Date>2Q03 Semiconductor Forecast Update

Entire contents © 2003 Gartner, Inc. All rights reserved. | Page 27

Page 28: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Conclusions

Supply is shifting from inventory to production

Capacity utilization is improving, especially for leading-edge technologies

Foundries are recovering

Capital spending has stabilized and will grow7 percent in 2003

Capital equipment markets will boom in 2004 and 2005

Page 29: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Semiconductor Industryand Market Outlook, 2Q03Session 2

Richard GordonBryan LewisTom Starnes

Joe Byrne

Page 30: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Semiconductor Device Forecast Update, 2Q03Session 2 Agenda

Semiconductor DeviceForecast Update ..………………………. Richard Gordon

Best-of-Breed SuppliersDominate ASIC/ASSP Market ...……………Bryan Lewis

Embedded Processors: The Key to Tomorrow's Applications ..……. Tom Starnes

Wireless LAN Breaks Outof the Beige Box ..……………………………… Joe Byrne

Page 31: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Semiconductor Device Forecast Update

Richard GordonResearch Vice President

Page 32: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Semiconductor Device Forecast Update, 2Q03Key Issues

1. What is the status of the recovery in the semiconductor industry?

2. What is the medium- to long-term marketgrowth outlook?

Page 33: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Worldwide Semiconductor Forecast Update, 2Q03Unspectacular Recovery Continues

Overall improvement in demand expected to begin in the second half of 2003

Tightening supply will firm up device ASPsin 2004

Caveat … Lack of confidence in

end markets means poor order visibility and forecast uncertainty for semiconductor vendors

Timing/rate of next industry upcycle determines annual growth in 2003and 2004

0

10

20

30

40

50

60

1Q

02

2Q

02

3Q

02

4Q

02

1Q

03

2Q

03

3Q

03

4Q

03

1Q

04

2Q

04

3Q

04

4Q

04

5.7%6.3%

8.5% 2.5%-3.6% 1.2%

5.1%3.2% 2.2%

12.1%7.1%

4.4%Quarterly Sequential Growth

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Revenue (Billions of Dollars)

Page 34: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Worldwide Semiconductor Forecast Update, 2Q03: Market Size and AGRs by Device, 2002 and 2003

2003 Total Market = $168 BillionAGR by Device

13%

5%

10%

11%

2%

10%

6%

10%

0% 5% 10% 15%

Memory

Micro

Logic

Analog IC

Discrete

Opto

ASIC

ASSP

2002 Total Market = $155 BillionShare by Device

Memory18%ASSP

24%

Micro25%

Logic5%

Analog IC 6%

Discrete8%

Opto4%

ASIC10%

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 35: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

0

50,000

100,000

150,000

200,000

250,000

2000 2001 2002 2003 2004 2005 2006 2007

ASSP

ASIC

Opto

Discrete

Analog IC

Logic

Micro

Memory

Worldwide Semiconductor Forecast Update, 2Q03: Cyclical Recovery Is Under Way

Application

Specific

General

Purpose

-31.2% 1.9%8.3%

23.1%

21.8%-5.2%

5.6%

Annual Growth

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Revenue (Millions of Dollars)

Page 36: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Best-of-Breed Suppliers Dominate ASIC/ASSP Market

Bryan LewisResearch Vice President and Chief Analyst

Page 37: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

ASIC, ASSP and FPGA:Key Issues

1. How are the markets for ASICs, ASSPs and FPGAs evolving?

2. Who are the leading ASIC and ASSP vendors?

3. What does it take to succeed in theASIC/ASSP market?

Page 38: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Vital Market Statistics: ASIC, ASSP and FPGA Market Growth Rates, 2002 and 2003

Total Semiconductor Market

1.6 percent AGR in 2002

8.3 percent AGR in 200310.3%

-12.2%

-4.0%

6.1%5.4%

14.3%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2002 2003

ASIC

ASSP

FPGA/PLD

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 39: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Strong Growth on the Horizon

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007

ASIC

ASSP

FPGA/PLD

2002-2007CAGR (%)

ASIC ..………. 8.4%

ASSP .…….. 10.5%

FPGA/PLD .. 18.5%

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Revenue (Billions of Dollars)

Page 40: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

0

2,000

4,000

6,000

8,000

10,000

12,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

ASIC

ASSP

-36%-17%

-12%-3%

Design Starts:Leading or Misleading Indicator

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Design Starts

Page 41: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Formula 1 Racing

Ferrari

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 42: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

ASIC and ASSP Race Winners

ASSP

Intel

ST

Qualcomm

ASIC

ST

IBM

TI

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 43: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Microcomponent Memory Analog DiscreteOptoLogicMicrocomponents Memory Analog DiscreteOptoLogic

Microcontroller

Microprocessor

Microperipheral

DSP

Standard Logic

Full-Custom IC

FPGA/PLD

Gate Array

Cell-Based

LCD

Other Logic

ASICASIC

Total OtherTotal OtherLogicLogic

DRAM

SRAM

Nonvolatile

Other Memory

General-PurposeGeneral-PurposeAnalogAnalog

ASSP AnalogASSP Analog

Semiconductor

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Old Definition Family Tree

Page 44: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Communications

ASICASSP

ASICASSP

ASICASSP

ASICASSP

Industrial AutomotiveMilitary/

Aerospace

ASICASSP

ASICASSP

ASICASSP

DataProcessing

Wireless

Consumer

Wired

Memory

FPGA/PLDLCDStandard LogicOther Logic

Logic Analog Opto Discrete

DRAMSRAMNonvolatileOther Memory

MicroprocessorMicrocontrollerDSP

Microcomponents

Application-Specific Devices

GeneralPurpose

Semiconductor

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

New Definition Family Tree

Page 45: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Top 10 ASIC Suppliers: 2002

0.0 0.5 1.0 1.5 2.0 2.5

Sony

Philips

Toshiba

LSI Logic

Fujitsu

Agere

NEC

TI

ST

IBM

Revenue (Billions of Dollars)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 46: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Top 10 ASSP Suppliers: 2002

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Sanyo

Toshiba

Motorola

TI

Infineon

Nvidia

Philips

Qualcomm

Intel

ST

Revenue (Billions of Dollars)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 47: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Top 10 ASSP Suppliers, 2002:Data Processing

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Marvell

Broadcom

TI

MediaTek

SIS

ATI

VIA

ST

Nvidia

Intel

Revenue (Billions of Dollars)

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 48: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Characteristics of ASIC and ASSPMarket Leaders

All have the largest R&D budgets

All have economies of scale

All have a vertical market focus

All have leading-edge system knowledge

Many have in-house leading-edge manufacturing

Page 49: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Conclusions:ASIC and ASSP Market

Each large, mature market generally supports only two or three suppliers

R&D budgets and economies of scale playkey roles

The worst is behind us and the market rebound has started

The ASIC market is not dead

Page 50: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

ASIC and ASSP Supplier Recommendations

Focus on a specific vertical market

Invest in system knowledge

Know your value proposition

Own a vertical market or submarket

Small companies should find a niche in which they can dominate and grow

Page 51: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Embedded Processors:The Key to Tomorrow's Applications

Tom StarnesResearch Vice President

Page 52: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Embedded Processors:Key Issue

1. How will new product features drive the market for next-generation embedded processors?

Page 53: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Microcomponent Chips:Programmable Processors

Microprocessors (MPUs)

Microcontrollers (MCUs)

Digital Signal Processor (DSP)

Compute

Embedded

4- and 8-Bit

16-Bit

32-Bit

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 54: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Programmable Processors:Permeate Semiconductor Chips

Microprocessors (MPUs)

Microcontrollers (MCUs)

Digital Signal Processor (DSP)

CustomerLogic

Application-Specific Integrated Circuit

(ASIC)Application

Logic

Application-SpecificStandard Product

(ASSP)

MPU MCU DSPMPU MCU DSPMPU MCU DSP

Processor Complex

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 55: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Flexibility: Why Processors Are Invaluable

Possibilities A processor for any task

Availability Also integrate into SOC

Versatility Software programs

Upgradability Correct, upgrade, extend

Greatly Reduced Risk

Page 56: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Embedded MPU

4- and 8-Bit MCU

16-Bit MCU

32-Bit MCU

DSP

0

5

10

15

20

25

30

35

40

2001 2002 2003 2004 2005 2006 2007

($B) Embedded Processor, 2002-2007 CAGR = 10.9%

(Compute MPU Does Not Add to Other Devices)

CPU

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

The $25 Billion Embedded Micro MarketHosts Many Vendors and Many Applications

Page 57: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Embedded Micro Vendors SucceedWith MCU and DSP

1

2

3

Motorola T I Hitachi NEC Mitsubishi

DSP

MCU

Embedded MPU

($B)2002 Total Market: $17.1 Billion

Toshiba

Renesas1+1=2

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 58: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

MPU DSP

Flash SRAM

GSM/GPRS

Integrate … Integrate … Integrate

System-on-a-Chip

System-in-a-Package

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Intel Gets Into Embedded MarketWith Both Feet

Page 59: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Embedded Processor Cores: Implementation Options Vary

ZSP

TI

PowerPC

MIPS

ARM

General- ASSP ASIC PLD Foundry Purpose

From "Off the Shelf" to "Roll Your Own"

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Page 60: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Many Complex Characteristicsof Processors

8-Bit 16-Bit 32-Bit 64-Bit

Integer Arithmetic, Logic, Control, Addressing

Floating Point

Accelerators

Multilevel Cache

Memory Management

RISC, VLIW

Prediction

Superscalar

Performance

Compressed Instructions

Cores, Synthesizable

Configurable

Java

Signal Processing

Vector, SIMD

Network

Media

Security

. . .

All Impact Processor Applicability to a Given End Equipment

Page 61: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Features for the Future

To Address Upcoming Needs ...

Multiple cores Configurable and

reconfigurable Multichip packaging Analog Low power

… and the Usual

Architecture Integration Performance Application Network Flash

Page 62: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Independent Benchmarks Expose Reality

MHz, MIPS, Dhrystones — Poor

EEMBC — Very good

BDTI — Excellent DSP

Power —

But Only a Technical Comparison

CR2032Coin Battery

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Comparative Shopping

Page 63: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Support Determines the Winners

Support Is Critical — Never Underestimate This!

Development tools — Compilers, emulators

Operating systems, algorithms, standards, drivers

Complete application programs

Reference design, chipsets, licenses, manufacture

Partners, third parties, "ecosystem"

All — Specific to the application

Page 64: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Conclusions and Recommendations

Processors permeate semiconductors

The market continues to mature, but "cores," SOC and SIP are the future

Watch Intel

Support outweighs technology

Page 65: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Wireless LAN Breaks Out

Joseph ByrnePrincipal Analyst

Page 66: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Wireless LAN Chip Suppliers:Key Issues

1. How is the market for WLAN chips evolving?

2. How can WLAN suppliers survive in an intensely competitive landscape?

3. Where are the WLAN opportunities outside the PC space?

Page 67: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

WLAN Chipset Market Share Ranking, 2002

2002Supplier 2001 2002 AGR Share

Intersil 120 225 88% 51%

Agere 50 110 120% 25%

RF Micro Devices 0 25 NA 6%

Texas Instruments 1 20 1,900% 5%

Atheros Communications 5 17 240% 4%

Atmel 7 15 114% 3%

Philips 20 13 -35% 3%

Broadcom 0 11 NA 3%

Total 203 436 115% 100%

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Revenue ($M)

Revenue ($M)

Page 68: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Brutal Competitive Landscape

Power Amplifier

RF

Baseband/MAC

5.0GHz

2.4GHz

Mix of Technology Expertise Among Suppliers

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 69: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Suppliers Span the Entire Spectrum

Sixty would-be competitors; 40 percent are established semiconductor suppliers

Incumbents: Intersil, Agere, Atheros, etc.

Large recent entrants: AMD, Intel, TI, Broadcom, etc.

Smaller recent entrants: RFMD, Marvell, etc.

Taiwanese: ADMtek, Realtek, etc.

Startups: (Airoha, Bermai, Cognio, Envara, IceFyre, Synad, etc.)

Page 70: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Four Survival Strategiesfor WLAN Chip Suppliers

Leverage

Microprocessor PC core logic chipset DSL/cable transceiver Cellular (?)

Best Buddies

"You do the MAC/baseband … … I'll do the RF"

Living on Air

"Margins?""We don’t need no stinking margins!"

Marketing Presence/Incumbency

Established WLAN suppliers Established wired LAN suppliers Large chip companies

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 71: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Two Popular (but Risky) Survival Strategies

Technology to the Rescue

Better Faster Stronger

Star Trek

"To boldly go where no man has gone before"

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 72: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Technological StrategiesWill Not Be Enough

Technology Goals

Range/throughput extension

Density improvement

Power dissipation reduction

Cost reduction

Features (for example, QOS)

Technology's Shortcoming

In contests between superior and good enough, good enough wins

10x improvements are required

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 73: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

For Volumes to Continue to Grow, WLAN Needs to Transcend PC Market

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2001 2002 2003 2004 2005 2006 2007

Smartphone

Consumer Electronics

BBR — Upside

Broadband Router

PDA

Access Point

PC Adapter

Chipsets Shipped (Thousands)

Potential Contribution of Various Product Markets to Overall WLAN Chip Shipments

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 74: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Falling Chipset Prices Will SuppressRevenue Growth and Profits

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2001 2002 2003 2004 2005 2006 2007

0

100

200

300

400

500

600

700

800

Chipset Unit Shipments

Chipset Revenue

Chipsets Shipped (K) Chipset Revenue ($M)

"WLAN Chip Shipment Growth

Outstrips Revenue Growth"

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 75: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Conclusion:WLAN Chipset Market Will Be a Mess

Multitude of Winning Survival Strategies MeansMultiple Survivors– Competition will force prices lower

"Leverage" Strategy Means WLAN Chipset Profitability Is Secondary

Biggest Markets Have Yet to (and May Never) Materialize– Cellular and consumer electronics are uncertain target markets– Companies that miss out on PC-driven boom must either invest

in redesigning their products to serve other markets or give up on trying to develop WLAN products altogether

Page 76: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Semiconductor Industryand Market Outlook, 2Q03Summary

Jeremey Donovan

Page 77: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Improved Market Conditions Hingeon the Demand Side

Demand Macro Factors

Consumer confidence Enterprise IT expenditure Carrier capital expenditure

Supply Macro Factors Process technology IDM vs. fabless Intellectual property

Fab Capacity and Utilization Capacity utilization is improving, especially for leading edge

Average Selling PricesPrice pressure remains because of excess capacity, although the situation is improving

Applications

WLAN is exploding but massively oversupplied Excitement concentrated in digital consumer and automotive

Devices

ASIC/ASSP/FPGA: Demand for ASICs remains, but high growth opportunity is in FPGAs

MPU/MCU/DSP: Embedded processor cores becoming ubiquitous

Semiconductor InventoryExcess inventory is no longer a problem; shortages may appear

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 78: Gartner Dataquest Semiconductor Industry and Market Outlook, 2Q03 Welcome!

Why Settle for Anything Less?

Gartner Facts:Forty-eight semiconductor analysts in nine locations Coverage of vertical equipment and device marketsCoverage of semiconductor manufacturingContinuous semiconductor coverage since 1975Total of 1,200 research analysts and consultants in 90 locationsA stable and profitable public company with about $900 million revenue in 2002