February 3, 1999
Intel, Analog Devices Form Deal
To Develop Communications Chip
By JON G. AUERBACH and DEAN TAKAHASHI
Staff Reporters of THE WALL STREET JOURNAL
Semiconductor makers Intel Corp. and Analog Devices Inc. have
formed a partnership to develop a fast-growing type of
semiconductor chip used in communications equipment, people
familiar with the matter say.
Under the terms of the deal, which is expected to be announced
Wednesday, the two companies will design a series of digital signal
processors, or DSPs. DSPs are used in products including cellular
telephones and computer modems.
For Analog, Norwood, Mass., a
partnership with the world's largest chip
maker could be a crucial endorsement as
it tries to expand the use of its specialty chips from computers to
products such as air conditioners and refrigerators. Analog is the
No. 3 player in the multibillion-dollar DSP market, behind Texas
Instruments Inc. and Lucent Technologies Inc.
Intel, Santa Clara, Calif., doesn't make DSP chips, and the alliance
could allow the company to fill an important product gap as it
moves beyond microprocessors to making chips for all types of
appliances.
Representatives of Analog and Intel wouldn't comment on any
details of the alliance.
The chips that the two companies develop will most likely be used
in modems, networking devices and other communications
devices, say people close to the matter. It couldn't be learned
whether Intel plans to market modems, but one area of the market
that is growing fast is digital-subscriber line modems, which are
used to provide fast Internet access over regular phone lines.
DSP chips take analog signals, such as voice and images, and
convert them into digital signals. For instance, a DSP inside a
cellular phone converts, encrypts and compresses the human voice
into a digital signal before it is sent over the airwaves.
ADI's DSP sales in its current fiscal year, which ends in October,
are expected to reach about $400 million, more than a quarter of
the company's overall estimated revenue of $1.35 billion, analysts
say. Big customers include 3Com Corp., Siemens AG and Philips
Electronics NV.
The market for DSP chips is expected to hit $4.5 billion this year,
from $3.5 billion last year, according to Semico Research in
Scottsdale, Ariz.
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