Outlook
Margins squeezed in disk-drive market
MOUNTAIN VIEW, Calif. - Much of the disk-drive industry went after market share rather than profit margins last year. As a result, global revenues fell 5.2%, despite an 11.1% increase in unit shipments, according to new data from Disk/Trend Inc.
This trend didn't do much for the bottom lines of drive makers or their chip-maker vendors. This year could be a bit better, according to the market researcher. It predicted a 7.7% increase in revenue and a 16.1% rise in unit shipments.
By 2002, the report forecast, the rigid disk drive industry should reach the astounding figures of more than 250 million units shipped and worth more than $50 billion. But the number of suppliers keeps falling. While 59 manufacturers were competing at the beginning of the 1990s, only 18 active or announced suppliers remain. Two vendors fell out last year alone.
Key to the industry's future growth, Disk/Trend says, will be the growth of non-captive sales at the expense of "captive" or internal sales. These market sales will expand from 76.5% of total 1998 sales to 83.7% in 2002, Disk/Trend adds.
Once again, the leading manufacturer was IBM Corp., which accounted for 27.1% of 1998 worldwide sales. In second place was Seagate Technology with 19.8% of the market. Quantum Corp. was third with 12.4% of the total market. Both of these companies, however, lost market share last year due to severe competition, according to Disk/Trend.
CMP industry going after leader Ebara
NEW TRIPOLI, Pa. - The market for CMP (chemical mechanical planarization) production equipment is getting far more competitive, even though it's still growing at a good clip. Everyone is going after Japan's Ebara Corp., the market leader in unit sales, according to a new report from The Information Network in New Tripoli, Pa.
But last year, the CMP vendor was cruising. Ebara shipped 222 CMP tools to wafer fabs worldwide in 1998, nearly double the 112 systems it delivered in 1997, says Robert N. Castellano, president of the market researcher.
Pushing the hardest now is Applied Materials Inc., which in early June introduced its first CMP cleaning system for its tools. The new Mirra Mesa system integrates a four-step cleaning process with Applied's polishers, providing dry-in/dry-out processing. Until now, Applied was shipping CMP tools with integrated cleaners from the OnTrak Systems subsidiary of Lam Research Corp. and DNS Korea Co. Ltd.
Applied ended up taking over the lead in CMP revenues last year because its polishers sold for an average price of $1.8 million vs. Ebara's $1.1 million for a one-head tool with integrated cleaning. With a cleaner attached, Ebara's two-head CMP systems go for an average of $1.6 million each, he notes.
"Applied's Mirra Mesa CMP, which combines wafer polishing and cleaning in a single system, follows Ebara's 112 and 222 [models] by more than two years," says Castellano. Already, he adds, Ebara has sold hundreds of its systems into Asia for exploratory work on DRAMs. This move gets the firm's foot in the door for the time when the Asian DRAM industry " fully embraces CMP " in its production lines, he adds.
Cell phone chips to grow 17% annually
SCOTTSDALE, Ariz. - The big move to connectivity will propel the chip market for digital cellular and PCS mobile phones upward at the compound annual growth rate (CAGR) of 17% over the next five years. This forecast comes from the In-Stat Group, which expects this IC business to hit $13 billion in 2003.
Memory going into cellular and PCS phones will climb even faster, growing at a 32% CAGR--from $900 million in 1998 to $3.5 billion in 2003. Higher-density memory will drive this growth, with 16 megabit Flash soon expected to become a mainstream part along with the 4 megabit SRAM. Driving their growth will be the next wave in data connectivity - untethered e-mail and browsers for Internet access, as well as multimode phones. The industry is expected to continue integrating functions over the next several years such as the low-noise amplifier and mixer, codec with digital baseband or analog baseband, and power management with analog baseband, according to the market researcher.
"There will be a transition from discrete, separate Flash and SRAM packages to one package with stacked Flash and SRAM chips, thereby fulfilling the manufacturer's need for memory density, versatility, and flexibility for building many different models," maintains Joyce Putscher, In-Stat analyst. As a result, she says, chip players will need to own both memory technologies, or partner for one of them, in order to survive.
She predicts that analog baseband will swallow other chips in the system, causing this functional block's value to show the next-highest growth after memory. Digital baseband will grab the greatest percentage of semiconductor market share value through 2003.
Cellular phones gobble up chips
SAN JOSE - There seems to be no doubt about it now. The big driver for chip sales over the next few years is going to be the cellular phone.
The U.S. wireless data market is going to grow from 3 million subscribers this year to 36 million subscribers in 2003, according to Dataquest Inc. "The main driver for the growth of the market will be messaging via the Internet and mobile-originated responses," says Naqi Jaffery, industry analyst for Dataquest.
Two of the fastest growing areas in the wireless data market are expected to be SMS (short messaging service) and two-way paging. By 2003, 67% of all wireless data subscribers will be using SMS to receive and send e-mails, get information, make data inquiries and schedule reservations, the analyst predicts.
Two-way paging will also be important in the market, making up 19% of total wireless data subscribers. "The growth of wireless data will receive an additional push as digital cellular and PCS expand their data capabilities through 2003," Jaffery adds.
The picture is changing rapidly. Texas Instruments Inc., for example, has just revised its estimate for worldwide shipments of digital cellular phones upwards by 6% this year, from 230 million to 245 million handsets.
TI is now pushing hard to capture as many of the cellular phone designs as it can because since 1997, more digital phones have been sold than PC, it claims.
Router sales shoot up 38% in Q1
SAN JOSE - Routers are not getting wiped out by switches. In fact, both the router and local-area-network (LAN) switch continues to drive growth in the worldwide LAN market in the first quarter of 1999. LAN revenue grew to $5.8 billion in the first quarter, an increase of 19.1% over last year, according to Dataquest Inc. The router market grew 38%, with revenue reaching $1.8 billion, while LAN switches grew 37% to $2.6 billion, up from $1.9 billion last year.
"Far from being supplanted by switches, the demand for routers of all kinds continues to show healthy increases across the board," comments John Armstrong, Dataquest vice president.
Cisco Systems continued to dominate the worldwide router market, with revenue reaching $1.4 billion, an increase of 53.3% over the first 1998 quarter (see chart). Nortel Networks remained in second place with revenue of $139 million, and 3Com jumped into third place with 45% growth.
Fast Ethernet and Gigabit Ethernet continued as the fastest growing segments of the LAN switches market, while 10-Mbps Ethernet declined 44%. Gigabit Ethernet grew tenfold with revenue of $211 million, up from $18 million during the first quarter of 1998. Some $1.7 billion in Fast Ethernet switches was shipped in the first quarter of this year.
Fab utilization jumps in quarter
SAN JOSE - Capacity utilization in the world's integrated circuit fabs went up a bit in the first quarter, averaging 84% vs. 81.7% in the fourth 1998 quarter, according to new data released by the Semiconductor Industry Association here.
MOS fabs were doing a tad better - operating at 85.5% of their total capacity worldwide vs. 82.9% in the final three months of 1998, according to the Semiconductor International Capacity Statistics report.
Bipolar processing plants were a different story. They were using just 73.8% of their capacity, down slightly to 73.8% from 74.1% in the final three months of last year. Bipolar fabs averaged 304,800 wafer starts a week in the first quarter vs. 339,900 wafer starts in the fourth quarter last year, the report says.
Overall, the new report shows the utilization of IC fabs rising steadily since the low point in the third quarter last year when wafer-processing plants were running only 80.8% full.
While the capacity rate was rising, total output of fabs continued to drop in the first quarter. The report says that worldwide fabs were running an average of 1.69 million wafer starts a week in the first three months of this year compared to 1.73 million in the fourth quarter. Wafer starts, measured in 6-inch equivalents, peaked in the third quarter 1998 at 1.78 million.
Is network processor finally taking off?
FRAMINGHAM, Mass. - The need to speed up time-to-market turnaround and eliminate bottlenecks in current local-area-network architectures are expected by International Data Corp. to light a fire under the network processor market.
"As the demand for networking convergence increases, semiconductor vendors will need to offer network-optimized products to enable higher-layer quality-of-service (QoS) intelligence at wire-speed performance levels," says Sean Lavey, IDC analyst. "The successful implementation of this new breed of chips will spark many changes in the networking marketplace as these semiconductor vendors try to position themselves as the de facto standard in the industry."
A growing list of network processor (NPU) vendors, which includes eight companies from Intel Corp. to startups, have announced products or intentions to provide network processors to power the next generation of networking equipment.
Fighting back, established ASIC and MPU competitors are planning to improve their products and revamp their strategies to defend against these emerging players. With all this increased vendor activity, IDC expects the worldwide NPU market to grow to over $300 million by 2002.
"The trend toward network access consolidation of data, voice, and video traffic will become very critical to the growth outlook for networking OEMs and service providers," Lavey says. "The value of silicon will become more apparent as semiconductor vendors drive the future of edge and core networking equipment."
Initial benefits of NPUs will fit best with high-end applications, such as core switches, high-end enterprise, and carrier-class routers, IDC believes. The market researcher expects by late 2001 that midrange and low-end enterprise LAN markets, such as workgroup switching, will switch to NPU usage in the latter part of 2001.
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