STMicro holds optimism for 2002 rebound
By Rick Merritt
EE Times
(06/04/01 15:39 p.m. EST)
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NEW YORK — A sense of muted optimism pervaded the annual analyst meeting of STMicroelectronics last week. The $7.8 billion chip maker frankly detailed the woes of this year's sagging market but expressed significant hopes for the new products and dynamics that could drive a turnaround next year.
Last year's exuberance fueled overproduction of as many as 60 million cellular phones and 10 million digital set-top boxes, leading STMicro's chief economist, Jean Philippe Dauvin, to predict chip industry revenues will plunge 18 percent this year. Taking its own lumps in that drop, the company announced it will slice $400 million from its capital budget this year and shutter an Ottawa fab it bought from Nortel Networks last year for $60 million, laying off 400 people.
Climbing up from the hole, STMicro said it is feeling a slight uptick in chip sales related to set-top boxes, expects to double its digital subscriber line sales this year and foresees significant growth in DVD products. The company also detailed plans for an array of new products planned for cell phones, set-tops, DSL and other existing or emerging markets that it hopes will fuel a resurgence starting late this year.
While declining to forecast numbers for 2002, Dauvin painted a cautiously optimistic picture of chip industry recovery for next year with revenues that should fall between those of 1998 and 2000. The upturn will start slowly in the fourth quarter as seasonal demand returns, business IT spending picks up and cell phone inventory is finally worked off, he said.
"I think we will have to wait until the second half of 2002 to see a strong and long-lasting rebound," said Dauvin. Still, he noted that the chip industry acted like a tennis ball in nine other downturns, bouncing back as far as it shot down. "If history repeats itself we could have a strong rebound next year," he added.
There's no lack of long-term underlying demand for existing applications in communications, consumer or automotive electronics, Dauvin said. However, he drew a more dour picture for the mainstream computer industry fueled by microprocessors and DRAMs, where STMicro is not a player. "We are approaching a structural slowing down of the microprocessor market," he said.
The PC and the U.S. markets generally will bear the brunt of the downturn, declining as much as 30 and 25 percent respectively this year, he forecast.
"The strong slowdown in business investments has particularly hurt IT spending, which makes up as much as 65 percent of those investments," Dauvin said, adding that he would not be surprised to see industry capital expenditures plunge as much as 40 percent this year.
"The cycles are coming steeper and faster, and this is the steepest downturn I have seen in my career," said Pasquale Pistorio, president and chief executive of STMicro, who said the company's strategic programs would be spared in its current round of capital-expenditure cuts. "Our 12-inch pilot line is going ahead exactly as planned," he added.
Instead STMicro will hold a new 8-inch fab qualifying its first wafers in Singapore's Ang Mo Kio district to output of 1,000 wafers per month. It is built for 10,000 wafers/month. A fab in Rousset, France, will hold at its current level of 50 percent facilitation. And STMicro's use of foundries has been halved from 12 percent of production last year to less than 6 percent today, said Alain Dutheil, STMicro's corporate vice president of strategic planning.
Consumer, comms upticks
Digital set-top boxes could be the first area to rebound, said Philippe Geyres, general manager of STMicro's consumer and microcontroller groups. "I think this was the first sector to go into inventory correction late last year, and it may be the first to come out of it," he said. "We are now receiving short-term orders for June and July for digital satellite and DVB set-tops, and DVD looks like it could be strong in the second half."
Only 20 percent of set-tops have shifted to digital, leaving an open window for five good years of growth, Geyres said. Digital-cable boxes are just starting to ship, and the number of set-tops per household and the electronics content per set-top are both on the rise, he added.
Industry shipments of DVD players tripled last year to nearly 17 million units as the devices settled down to consumer prices just north of $100. As DVDs slot into cars, high-end audio gear, TV combo units and portables, shipments could rise to 23 million in 2001, he estimated. To propel that growth, STMicro is designing the Sti5800, its first single-chip DVD controller slated for introduction in 2002.
Recordable DVD players could form one dark cloud due to a war between multiple competing approaches emerging this year that "could hurt volume deployment," Geyres said. The devices are "expensive and the standards confusion will give users pause," he added.
However, engineers are actively designing a host of powerful handheld devices that play music and games and link to the Web. "Cell phone makers, game makers and PDA makers all want to do that. There will be several kinds of appliances," he said.
On the comms front, "DSL is one of the things that will pull us out of this downturn," said Aldo Romano, general manager of STMicro's telecommunications and peripherals/automotive groups.
Romano expects STMicro's DSL sales to double to 12 million chip sets this year as subscribers are expected to double to nearly 40 million worldwide with significant markets in China, Europe and the United States. His group is gearing up two new DSL chips for the central office as well as its first customer-premises DSL modems.
At the back end, the eight-channel Copperwing chip will debut this year. A 16-channel back-end DSL chip set sporting a new DSP-based architecture is in the works for 2002. The Unicorn, a very-low-cost DSL PC modem that tasks off a PC host processor, will ship in PCI and USB versions this year as an engine to fuel DSL uptake. Two higher-end versions will follow that add voice-over-IP functions. And by the end of the year, STMicro hopes to ship the first central-office VDSL chip set to hit speeds of 50 Mbits/second.
On the optical front, STMicro will add next year passive devices and microelectromechanical switches now in development to its current portfolio of optical ICs. The company acquired optical capabilities from Nortel and an Italian telecom company last year and is working with Agilent on optical microelectromechanical switches now.
In cellular, STMicro will make a bid to leap to into the digital baseband market from the springboard of its strength in analog RF and power components for cell phones. The company plans a multimedia cellular processor targeting power consumption of 20 mW. It will integrate an MPEG-4 decoder, ARM 9, ST100, audio DSP and image sensor. A version for the GPRS 2.5-generation cellular standard will ship with one OEM at the end of the year with wideband CDMA versions following.
At least two emerging markets are on the company's radar screen. STMicro is the first with silicon for Dataplay, startup maker of a 33-mm optical disk that acts as a flash replacement in mobile systems and holds 500 Mbytes. STMicro hopes to ship 100,000 of its Indus processors this year and as many as 5 million next year to serve at least two OEMs using the Dataplay drives in digital cameras and audio players.
Starting in September, STMicro also hopes to ship silicon for XM Radio's digital satellite car radios. The company hopes for a repeat of its success in digital satellite TV as it targets customers including Alpine, Delphi, General Motors and Pioneer.
But existing, not emerging apps, are likely to be the key players in any rebound, according to chief executive Pistorio. "There will be no major new drivers we don't know already, but a further accentuating of the existing applications," he said. |
