Business Week: November 30, 1998
Industries: SEMICONDUCTORS
CHIPS THAT MIMIC THE HUMAN SENSES
Companies are scrapping over this exploding market
You may not have realized it, but you've probably used digital-signal processing chips a dozen times today. Listening to a compact-disk over breakfast was one instance. So was using a modem to check your E-mail. Driving your car involved several electronic systems powered by these specialized chips. They are also found in cell phones, personal-computer sound systems, digital cameras--and the list goes on.
But that's nothing, compared with what's coming. Industry experts predict that by 2005, the convergence of computers, telecommunications, and consumer electronics will push demand for digital-signal processing (DSP) to 10 times what it is today. These chips will then be at the heart of almost every electronic gadget you touch, from new stereo systems and smart home appliances to office machines and factory equipment. DSP chips that can understand speech will replace touchpads and push-buttons on all kinds of products--including VCRs that you can program by telling them what to record.
BLINDING SPEED. What makes these chips so special? Well, DSP could stand for digital sensory perception, because these slices of silicon are the nerve cells that connect electronic devices to the real world. They're honed to deal with things like sounds, images, pressure, temperature, electrical currents, and radio waves. They chop these analog signals into digital bits, then perform specialized operations, such as compressing the bits gushing through telephone lines. And they do this at blinding speed. One of Intel Corp.'s Pentium chips couldn't keep pace with such signals for very long. A steady analog deluge would quickly swamp any ordinary microprocessor.
Digital cell phones are currently DSP's hot growth market. Some 86 million of these were sold worldwide last year, and the 1998 market is pegged at 140 million phones. That's 50 million more than this year's estimated sales of PCs. DSP chips even outnumber Intel microprocessors in PCs. Most computers have at least two DSP chips. One handles the data streaming to and from the hard-disk drive, and others control the modem, sound card, and graphics accelerator.
Small wonder that DSP chips are bucking the downturn in semiconductors. Total chip sales are projected to dip around 11% this year, to below $125 billion. But the DSP forecast calls for 20% growth, to $3.9 billion, followed by a 30% jump next year (chart), according to market researcher Forward Concepts Co. in Tempe, Ariz.
That outlook is fueling raging competition. Four U.S. chipmakers--Texas Instruments, Lucent Technologies, Motorola, and Analog Devices--command 97% of the world's DSP business. But newcomer IBM and a score of also-rans are rushing to stake claims, too. Hardly a month passes, it seems, without an announcement of a faster and more sophisticated chip.
In late September, for example, Motorola Inc. unwrapped new audio chips with better fidelity and bargain prices. CD players now have chips that handle sounds in 16-bit snippets. By harnessing smaller transistors, Motorola crammed the performance of its 24-bit chips--mainly found in studio gear--onto a smaller piece of silicon. The result: true-to-life sound for as little as $5. With 24-bit chips, CD players will sound just as ''warm'' and rich as a virgin vinyl recording, says Valerie K. Hase, head of digital-audio operations at Motorola.
The new chips will also turn cars into concert halls. Motorola's new technology provides processing speeds of up to 100 MIPS, or millions of instructions per second. Since that's more than enough to play music, auto companies can use the leftover horsepower to tune their stereo systems for the acoustics of each make and model. The chips can compensate for reflections off glass at specific distances and angles from the speakers. ''Cars are ideal for high-quality audio,'' Hase says, because interior dimensions and ''furniture'' are fixed--unlike living rooms.
Yet Motorola's new chips are pokey compared with some competitors. Texas Instruments Inc., the king of DSP with a 45% market share and 1997 sales of $1.44 billion, unveiled a chip last year that can process 1,600 MIPS. This blazing speed will be needed for digital-convergence products, such as cell phones that download Internet graphics and video clips, or modems that handle both data and speech simultaneously. Today, multimedia systems typically have a separate DSP chip for each type of signal.
TI's rivals are determined to keep pace. Analog Devices Inc. matched TI's 1,600-MIPS record last June--and then grabbed the lead in October. Its upcoming TigerSharc chip can chew through some 5,000 MIPS. ''It's really a supercomputer on chip,'' says Gerald McGuire, Analog's manager of high-end DSP products. Meanwhile, Lucent Technologies Inc.--parent of Bell Laboratories, which invented DSP in 1979--teamed up with rival Motorola last summer to develop new DSP technology. Also in October, the duo offered a peek at their StarCore chip, due out in late 1999. It swims almost as fast as the TigerSharc: up to 3,000 MIPS.
These superfast chips are paving the way for many new applications. All sorts of machines will soon join the human gabfest, talking and listening to people, predicts John T. Dickson, president of Lucent's Microelectronics Group. Copy machines, microwave ovens, and TVs could lose their push-buttons and sprout microphones. Over at TI, researchers see big promise in controls that boost the precision of machine tools and factory robots. DSP chips that interpret data from pressure sensors could yield artificial arms and legs with a sense of touch, suggests Thomas J. Engibous, TI's chairman and chief executive. Eventually, DSP might even create prosthetic eyes for the blind.
METER MOTOR. Cheaper chips, meanwhile, will worm their way into more mundane products. For example, most U.S. homes have dozens of motors, most of which run full blast when switched on. DSP controllers could put them on an energy diet, metering out just enough power to do the job. Electrolux, the Swedish company that makes 40% of the world's electric motors, is already shipping DSP-smart motors for commercial refrigerators, which consume 30% to 50% less juice than previously. Analog Devices supplies the DSP chips and says the technology could show up in consumer fridges next year.
As chipmakers continue to cram more transistors onto each silicon slice, most electronic products will soon be built around just one so-called logic chip--no doubt with a DSP module. So suppliers of other flavors of logic chips are revving up DSP technology. The pressure is most acute on makers of microcontrollers, the special-purpose processors that hide inside electronic products, and application-specific integrated circuits (ASICs).
What's ahead for them is already evident in the cell-phone business, where TI commands more than half the market, thanks to its strongholds at Nokia Corp. and Ericsson. ''In the old days,'' recalls TI's Engibous, ''we would sell them a DSP chip, and the ASIC guys would supply two ASIC chips.'' Now, he says, one $10 TI chip does it all.
Because DSP will be a cornerstone of most ''single-chip systems,'' TI is betting the farm on DSP. In the one-chip-does-everything era, Engibous says, ''the person who wins is the one who has the processor, because the person who owns the processor gets to do the integration.'' So Engibous has sold off all of TI's other businesses, including military systems, engineering software, and laptop computers. The last to go was dynamic random-access memory chips. DRAMs accounted for a quarter of TI's $13 billion revenue during the semiconductor boom in 1995. But their yo-yo profits have lately strung out to nothing. In June, the DRAM unit went to Micron Technology Inc. for $830 million in stock and notes.
Even with all his eggs in the DSP basket, Engibous isn't fazed by the mounting competition. ''There's no question that this is a competitive business--but no more than it has been for quite some time,'' he says. As for the Lucent-Motorola joint effort, they're ''just licking their wounds.'' Last year, Lucent's and Motorola's DSP sales climbed 30% and 20%, respectively, while TI's jumped 37%, says William I. Strauss, president of market watcher Forward Concepts.
SWAT TEAM. The competition isn't about to roll over, though. Hector de J. Ruiz, president of Motorola's semiconductor unit, asserts that one key to winning tomorrow's markets is developing technology standards. ''Customers strongly want standards,'' he says, to avoid being locked into a relationship with one supplier. Now, clients can't swap a Motorola chip, say, for one from TI. The reason: The chips are stuffed with proprietary software that's tuned to each chip's architecture. Working with Lucent, Ruiz aims to change all that--allowing both companies to woo TI's customers.
Good luck, retorts Engibous. Today, 70% of all DSP engineers work in TI's software language, and 900 universities teach it to programmers. That's why Strauss of Forward Concepts doesn't think anyone stands much chance of stealing TI's thunder. Investors seem to share his confidence. Since TI bowed out of DRAMs last June, its stock has climbed almost 30%, from $50. That's a signal that any chip could read.
By Otis Port in New York, with Paul C. Judge in Boston
Copyright 1998 The McGraw-Hill Companies, Inc. All rights reserved. Any use is subject to (1) terms and conditions of this service and (2) rules stated under ''Read This First'' in the ''About Business Week'' area.
11/25/98 6:45 PM |
