""It's applying the Cisco business model to the world of semiconductors. You form a large company with excellent distribution, develop some products internally and aggressively acquire hot new technologies from the outside," he added.
The industry consolidation is already happening. Aside from the Intel-Level One deal, Lucent just spent $250 million for Israel's Libit Signal Processing, a maker of chips that enable cable Internet access. 250M...not 4.5Billion!!!
Firms are also striking deals with each other. In February, chip maker MIPS Technologies struck a deal with Texas Instruments to combine its MIPs processors with TI's digital signal processor technology for home networking products and digital consumer devices, such as handheld computers. A number of companies have licensed MIPS' technology, including Broadcom, LSI Logic, and Toshiba.
Donovan said some movers and shakers in the industry include Broadcom, which specializes in high-speed Local Area Network (LAN) products and cable modems, PMC-Sierra, and Vitesse, both of which focus on SONET technology, networking equipment that offers high-speed data transmission over fiber optic lines.
These companies compete with the top players which offer broader product lines, including Lucent, Texas Instruments, National Semiconductor, Motorola, LSI Logic, and Conexant, which spun off from Rockwell Semiconductor Systems.
To capture more of the market, companies that historically created custom-made chips for specific purposes are now creating more standardized chips that can be used in multiple devices--and vice versa, Donovan said.
"Broadcom is starting to sell some custom chips and LSI Logic is starting to sell standardized products. The distinction is going away," he said. "They're doing it because it's better you, than someone else. If a very large customer wants a specific optimized design, it's worthwhile to build them that way, even if you're a standard company."
news.com |
