Agilent's Chip Sales Surge Following HP Split
By Crista Souza, EBN
Jan 6, 2001 (6:11 AM)
URL: techweb.com
Though sometimes overshadowed by a $7 billion sister operation for test and measurement equipment, Agilent Technologies Inc.'s Semiconductor Products Group is quickly carving out a position as one of the few chip makers with the know-how to be a leading player in communications.
Like the rest of Agilent, the chip operation was liberated by the separation from computer giant Hewlett-Packard Co. Agilent's semiconductor group last year struck out on its own to compete with the likes of Agere Systems, IBM Microelectronics, Intel, Motorola, and Texas Instruments, all vying for dominance of emerging wireless and Internet technologies.
With the possible exception, however, of Agere (formerly Lucent Microelectronics), Agilent is uniquely positioned to supply an end-to-end network solution using optoelectronics, high-speed optical and radio components, and mixed-signal and digital CMOS, according to Bill Sullivan, senior vice president and general manger of the unit.
“Most of our competitors are pure-play in each of these segments,” Sullivan said. “Very few of them can play across the whole spectrum.”
Three years ago, 45% of Agilent's semiconductor business was internal to HP, and consisted mainly of LEDs, RF diodes, and ASICs for printers and computers. Today, Agilent claims 90% of its $2.2 billion in semiconductor revenue is derived from fast-growing communications segments, with HP representing only 13% of the total.
Three main initiatives drive Agilent's chip business. Experiencing the fastest growth is the wireless segment. The company is employing new chip technologies such as enhanced pseudomorphic high-electron-mobility transistor (E-pHEMT) and Film Bulk Acoustic Resonator (FBAR) to shrink the size of radios, enabling such products as Samsung Electronics' “Dick Tracy” Internet phone.
Within the Internet infrastructure, Agilent is strongest in high-speed fiber-optic transceivers, and enjoys a 63% market share in Gigabit Ethernet fiber-port shipments, according to the Dell'Oro Group, Portola Valley, Calif. The company's goal is to leverage its LAN position to push out into the metropolitan area by bringing to market 10-Gbit/s fiber-optic transceivers at 10% of the cost of competing parts.
And leveraging printer technology gleaned from its days as an HP business unit, Agilent is asserting itself in imaging, pushing the concept of “embedded cameras everywhere” to wirelessly transmit data at high frequency into a network.
Meanwhile, the company's discrete optoelectronics business-which produces 6 billion devices annually-continues to grow on its own momentum, posting 30% growth in fiscal year 2000, company executives said. Though the unit is no longer a focus for Agilent, its sheer size provides tremendous manufacturing economies of scale for the areas that will drive the company's growth.
All the while, Agilent continues to be the major supplier to HP of printer and Unix server ICs.
“We think [we're] a pretty important player in some very important parts in the semiconductor industry, but not one that has received a lot of attention,” said Bob Walker, chief financial officer of Agilent Technologies, Palo Alto, Calif.
Agilent's more aggressive stance as an independent company is a welcome change for market observers, who watched while the semiconductor business stagnated for years under HP's control.“Over the years, Agilent has developed a pretty impressive combination of standard products and custom products,” said Stan Bruederle, an analyst at Dataquest Inc., San Jose. “It's about time they bring some of these things to the merchant market.”
There's no lack of competition in any one of Agilent's target areas, either in terms of suppliers or technology. For example, Agilent's E-pHEMT push in power amplifiers goes against the industry's momentum toward GaAs heterojunction bipolar transistor process.
However, Agilent has leading market positions in important product categories, such as Fibre Channel controllers, high-speed physical-layer ICs, and CMOS image sensors, according to analysts. The company claims to be Cisco Systems Inc.'s largest supplier of fiber-optic transceivers, and a recent ASIC design win for Cisco's Catalyst switches marked Agilent's first non-HP ASIC business. This week, Agilent is expected to announce that its 1-Gbit/s HHBA-501 Fibre Channel Host Bus Adapter has been designed into a new high-end server from NEC Corp.
“We're going to continue to look at all adjacent areas,” Sullivan said. “The baseband, we know how to do that, though there's a lot of licensing involved. We know how to do PDA chips as well. We're going to continue to provide more and more integrated solutions inside of these targeted spaces.”
Agilent's semiconductor group was formed by the union of HP's optical-component technology with its captive ASIC business, which had not been managed for optimal performance, according to Walker.
“One of the criticisms I hear is that Agilent is slow-moving and isn't willing to take decisive action in order to improve the business,” he said. “I want to stress, this is an organization that has moved quite boldly to change things quite substantially.”
After identifying communications as the central focus, Agilent dramatically slashed its U.S. manufacturing of discrete opto parts and transferred those operations to Penang, Malaysia. At the same time, the company shifted its CMOS IC production to a fabless model, entering a foundry joint venture with Chartered Semiconductor Manufacturing Pte. Ltd. in Singapore, with Motorola Semiconductor Products Sector providing copper interconnect technology down to the 0.10-micron level.
Partly as a result of this shift, the operating margin within Agilent's chip business rose to 12% in 2000, up from 7% in fiscal 1999.
In its first year as a publicly traded company, Agilent's chip sales have been impressive. Networking-chip sales grew 38% in 2000, to $844 million in revenue. Of that, fiber optics accounted for $571 million, growing 43% year- over-year. Wireless products grew 67%, to $357 million, while orders were up 73% over 1999. Agilent's imaging business, which targets digital still cameras, Internet cameras, and optical mice, brought in $609 million in 2000, growing 34% from the prior year.
Agilent's focus today is primarily on RF chipsets for cellular and PCS use, silicon bipolar, silicon germanium, and GaAs pHEMT. It is also the dominant supplier of IR chips, producing millions of units a month, for which the largest market is cell phones.
Fundamental to Agilent's wireless strategy is developing breakthrough technology. Its new FBAR single-chip filter technology, developed to enable small-form-factor applications such as wristwatch phones, is touted as delivering ceramic performance in a device the size of a SAW filter. Because it's semiconductor-based, it can be produced at a lower cost than comparable filters, Agilent claims.
Having made its name as a CMOS image-sensor manufacturer, Agilent is now shipping complementary image processors. In the optical-mice arena, the company ships 3 million sensors a month-largely inside of Logitech Web cameras, which ship with every Compaq Presario computer.
Another key technology on which Agilent is betting is a modular photonic network switch platform, co-developed with STMicroelectronics Inc., based on-of all things-ink-jet printer technology gleaned from HP.
Where Agilent itself is missing crucial technologies, it is making deals of all types, whether acquisitions, joint ventures, equity investments, or partnerships. In networking alone, the company has signed nine deals in the last 10 months, including an acquisition of Italia Telecom's research facility in Turin, Italy.
FYI,Jim |
