Playing the Field By Ed Sperling -- 11/5/2004
Electronic News
Jerry Fishman, president and CEO of Analog Devices, sat down with Electronic News to talk about DSPs, business in Asia and the future of the analog market. What follows are excerpts of that discussion.
Electronic News: How’s your DSP business going?
Fishman: It’s making money now. And the product portfolio has become a competitive weapon. For a couple years we were making a lot of investments. We were trying to pioneer two new cores at the same time, which is not a simple process. But it looks like these cores have traction, not only in a couple verticals. They’re doing well in a broad base that has never used DSPs before. By the end of this year we’ll have 8,000 to 10,000 customers using these cores. It’s hard to project the exact envelope of sales, but all the signs are very positive. Even the most cynical have acknowledged that we have something here.
Electronic News: Is that going even out the ups and downs of your DSP business?
Fishman: I don’t think so. It evens it out a little bit in that we’re not as dependent upon two large verticals, which the DSP business has always been. If you go back over the last couple years, 90 percent of all DSPs in the world were sold into handsets. Now, with the breadth of applications of DSPs, it will be smoother than the gyrations in the handset business.
Electronic News: In terms of your total business, is the analog cycle different from the DSP cycle?
Fishman: Not really, because the products are going into the same applications. The overlap between DSP and analog is very high.
Electronic News: Is there more competition headed your way in the analog market?
Fishman: There’s a lot of people who talked about this, because there’s more visibility into the profit structure of the analog business versus other businesses. But if you look over the last four or five years, there’s still a split between the high-performance market and the low-performance market. There are still only a handful of companies doing the high-performance part because it’s hard and there aren’t many companies that do that well. There is a lot of talk, but when you look at share and customer perception, that hasn’t changed?
Electronic News: Is it still based in the U.S. and Japan?
Fishman: It’s changing. We’re doing over half our sales in Asia now. That trend is steadily increasing. A lot more design is being done in Asia-China, Korea and Taiwan. There’s still lots in the U.S. and Europe, but Asia is growing.
Electronic News: What does that mean for your business?
Fishman: We’re building the same kind of franchise that we built in the United States and Europe. In China, there will be tens of thousands of customers. Our sense is that developing that horizontal market is just as important as some of the large verticals, so we’ve begun to put an infrastructure into some of those areas that is very similar to the one we developed in the U.S. and Europe. In addition to a selling infrastructure, we’re putting in an applications infrastructure for both horizontal and vertical applications. Eventually you have to have an infrastructure that matches the opportunity. There’s also a lot of emerging stuff here in the United States and in Europe and Japan. It’s just that the Asian piece is a lot bigger than it was several years ago.
Electronic News: Do you see that as an opportunity or a threat?
Fishman: Right now it’s an opportunity. You always have to worry about what’s going to happen in China and will they develop a lot of this stuff themselves. But our sense is that the companies that are emerging in Asia are very focused on the highest-volume verticals, because that’s where the quick action is. I think it’s going to develop very similar to the United States, where there were some indigenous companies that served the local market with low-performance products.
Electronic News: Is it possible that you’ll finally have a ready supply of analog engineers?
Fishman: Maybe 10 years from now. The universities in some of those regions are turning out top-notch engineering graduates, but there’s a very long development time. It takes quite a while for them to come up to speed.
Electronic News: Is that changing? Are the tools getting better?
Fishman: No, not on the analog side.
Electronic News: What’s the difference between a good analog engineer and a mediocre one?
Fishman: A lot of it is creativity. It’s still very hard to design analog products on a computer. For some of the very high-performance stuff you have to go out to a lab and pick up a soldering iron and put these things together because the specifications don’t fully describe its performance. They’re still very complex to model, there’s a lot of interaction between the product and the process you build the product on. It still takes a lot of experience and there is no substitute for that.
Electronic News: Is there a cultural bias toward that type of creativity.
Fishman: Most cultures look toward creativity as the key, particularly at the early stages of development. They tend to go for easy solutions, but over time I don’t see a big difference between China, Japan and the United States. There’s been a lot written about the Japanese way of doing things and the lack of creativity. I don’t see that. There are a lot of great Japanese engineers that are creative. It’s much more a pyramid than it is a cultural bias.
Electronic News: Will your end markets grow bigger over time?
Fishman: Ten years ago, the lion’s share of our products went into industrial signal processing applications. Those were the ones that only needed very high performance. Over the last 10 years, it has migrated to consumer products, which is where you’re seeing high-performance signal processing. It’s going into digital cameras, high-end cell phones, base stations and digital TVs. If you back 10 years ago, consumer products had the lowest performance signal processing. Now they have the highest performance. That’s created a lot of opportunity for companies like us, and we have shifted our business so that now industrial and military is 35 [percent] to 40 percent of our sales. It used to be 70 percent of our sales. There has been a pretty stark shift.
Electronic News: In the consumer market, where price is extremely sensitive, are they going toward more standard products?
Fishman: Not really. Given the cost pressures, the customers are trying to differentiate their products. At the low end, there is a lot of standardization. At the high end, Sony wants to differentiate its products from Matsushita, and they want to differentiate their products from Taiwanese and Chinese companies. There’s still a lot of focus on getting something that’s fairly unique -- not a general purpose product that will sell to 10,000 customers, but maybe one that will sell to 5,000 customers.
Electronic News: Is the differentiation coming in the chip or the software?
Fishman: Both. It depends on the market. Even though software does differentiate a number of products, you’ve got to be able to run the software on the chip. One of the great advantages of Blackfin is that it can run many different algorithms at the same time. The hardware innovation allows software innovation.
Electronic News: Most analog chip developers seem to have a tough time with software. Is it different in the DSP space?
Fishman: We have a lot of software developers on the DSP side. The analog designers have to understand how software can optimize their performance. In contrast, DSPs run software, so the best people have a good appreciation for both sides.
Electronic News: Aren’t more chips being designed as part of systems?
Fishman: That’s certainly true in some verticals. It’s very hard to design a converter that goes into a digital camera without understanding all the blocks and how they integrate. You need to know all the interfaces on the chip and, perhaps more important, which areas of performance you optimize. That’s a big deal. Without having some real systems knowledge in some of these verticals, it’s very hard to make those tradeoffs.
Electronic News: Does that put you into a closer partnership with your end customers?
Fishman: If you don’t have a close relationship with your end customers it’s very hard to design chips.
Electronic News: But your business has always been based upon a very broad customer base. Does that make it more difficult?
Fishman: We still take a great deal of pride in that we still sell to 60,000 customers and 10,000 different products, and the core of that technology is developed for these customers. Then we take that core technology and adapt it to some of these verticals.
Electronic News: Does that increase time to market?
Fishman: No, probably the exact other way. The time to market on some of these products is much, much lower. What takes longer is understanding what they’re after. We need to understand the system dynamics. If we have to start with a blank sheet of paper, it’s very difficult to meet a customer’s timetable. The real key is having a core already developed, which we spin around to get a solution. Blackfin has a core that we can sell to 10,000 customers. If they want a USB, we can make that spin. It’s the same with some of the analog products. If you have an A-to-D core, you can adapt it to the application. But if you have to start out doing the fundamental research for that core, it takes too long.
Electronic News: What you’re selling is largely intellectual property. Any plans to create a business model on that basis?
Fishman: No. We are a product company. That could happen in a unique situation, but it will happen rarely.
Electronic News: What process node are you at, 0.25 microns?
Fishman: Mostly 0.13.
Electronic News: But that’s for DSPs, isn’t it? How about analog?
Fishman: Yes, the analog is very heavily now 0.18. Fine-line CMOS is a great technology.
Electronic News: Are you going to manufacture it yourself?
Fishman: No, we will never manufacture CMOS ourselves. We use foundries, and so does everyone else. Even TI uses foundries. The size and scale you need to run a foundry is significantly beyond the means of most of us today.
Electronic News: Who’s your primary foundry?
Fishman: TSMC. We have one strong foundry and a couple backups. We use Chartered and a few others. It’s not a question of who offers you the best price, though. We have too much R&D invested to do that. |
