"There is definitely a war brewing between the PC guys and the CE guys and I am happy to ship armament to either side for the battle," said Chris Adams, VP of marketing, for the consumer division at C-Cube Microsystems.
From Page One of Electronic News: November 16, 1998 Issue
Special Feature: Consumer Products
The PC May Play Second Fiddle
sumnet.com
By Peter Brown
San Jose--For years the electronics industry has been driven by the personal computer,
with Intel and Microsoft pretty much calling the shots. However, over the last year and a half
the PC market has slowed, with prices dropping and components for PCs selling at seriously
low margins.
In the meantime, the digital consumer electronics (CE) market has started to emerge,
bringing with it the potential for high volumes of integrated circuits, systems and software.
Looking ahead to the coming years, the clear driving force for the electronics industry may
no longer be the PC, but consumer electronics.
This is setting the stage for a battle between traditional CE OEMs and the PC OEMs who
are showing great interest in entering the consumer electronics market. Many observers
believe this is because PC OEMs see their margins dwindling and growth in the PC market
continuing to slow over the next few years.
"There is definitely a war brewing between the PC guys and the CE guys and I am happy to
ship armament to either side for the battle," said Chris Adams, VP of marketing, for the
consumer division at C-Cube Microsystems.
In order for this market to live up to expectations, however, chipmakers and systems houses
face significant challenges. Semiconductor vendors and OEMs need to find the applications
and functions that consumers are willing to pay for, at an acceptable price point. Sorting
through the many opportunities-digital television (DTV), set-top boxes, digital versatile disc
(DVD), digital cameras, home theater, digital camcorders, and the broadcast PC-will be no
easy task. The convergence of many of these products will strain the design teams of even
the largest vendors.
"The biggest open question is the convergence of technologies," said Jonathan Cassell,
senior analyst at Dataquest in San Jose. "Having to determine what the consumer will want
and pay for is a huge challenge for OEMs. Knowing what kinds of additional functions you
will have to have and knowing when it is too much is a tough question to answer. People are
trying various things and experimentation is still ongoing with many CE OEMs trying to figure
out how this convergence will take place and how to take advantage of that."
Peng Ang, CEO of TeraLogic, which is designing chips for the digital television market, said
one of the big challenges facing OEMs is determining what kind of market they are going to
service. Will it be the set-top box market? Will it be an all-in-one box more like what some
of the PC manufacturers are looking at? Or will it be something completely unheard of at this
point.
"Big brand name companies have separate divisions working on separate applications all
competing for the same end-consumer," said Mr. Ang. For example, in the DTV market,
Mr. Ang said, companies have divisions working on a complete TV set, a set-top box and a
group developing analog-to-digital converter boxes.
One of the other challenges facing OEMs is determining what method will work best to
deliver these digital consumer applications. Will it be a system-on-a-chip with everything
integrated on a single piece of silicon and manufactured in a proprietary fab? Or will it be a
standard product that can be ramped up quickly in volume through foundries? Opinions are
mixed but more are starting to lean toward the system-on-a-chip philosophy.
According to Mr. Cassell, standard products dominate satellite applications, but video
gaming consoles and digital televisions, which have a heavy amount of semiconductor
content, are dominated by the ASIC and DSP manufacturers. .
Receiving Orders
Philips Semiconductor said it is receiving orders for its TriMedia chip because OEMs need
to get to market quickly and in different markets. The media processor model, a DSP-based
engine with programmable blocks that can be added, is the best way to go about it, said
Dirk Logie, GM of the TriMedia division of Philips.
VLSI Technology sees a mixture of consumer OEMs wanting custom parts and standard
parts that can be ramped up rather quickly. Building a complete DTV needs a custom
architecture because of the 18 ATSC formats, so VLSI might supply their customers with an
ASIC. On set-top boxes that could be used for terrestrial broadcast, cable or satellite
markets, each requires different front end technology that might be better suited for a custom
product for each application. But for other applications, such as DVD or digital cameras,
where the requirements are less flexible and more controlled, a standard product could be
used, the company believes.
According to Simon Dolan, VP of marketing for the consumer division at LSI Logic, the
traditional ASIC company is moving more toward a system company having to supply
multiple components on a single chip while supplying the software as well. Standard
products may work for some CE applications, Mr. Dolan said, but a majority of the
products are going to be done with some sort of an ASIC that has multiple levels of IP and
software on a chip.
While PC OEMs may be enticed by the CE market, right now the inside track is owned by
the traditional consumer electronic OEMs who have distinct roadmaps and targets for their
products. Some say the PC manufacturers have not figured out what they want to do in the
consumer space, and more importantly most have not figured out what the consumer wants
in the marketplace and how they can make money.
"So far it appears the consumer electronics people have had more success with putting PC
functions in CE applications rather than the PC guys putting CE functions into PCs," said
Mr. Adams of C-Cube.
Most agree PC OEMs are struggling with having to remake themselves from a PC-only
company to a company that deals in consumer electronics. "(PC OEMs) don't know the
consumer side well enough and think they can sell into it the same way as they have been
selling their PCs," said Tony Pellechia, VP of consumer business unit at STMicroelectronics.
"The consumer side hasn't changed all that much over the past few years whereas the PC
business constantly changes. PC manufacturers have to change their mindset if they are going
to be successful. If they really want to move into this area then they are going to have to go
full-bore into the CE space and not make it just a hobby."
Levels of Investment
Paul Vroomen, president of the consumer group at Oak Technology, said that the long-term
plan for Oak is to have the consumer group comprising one-third of the revenue for the
company.
For VLSI, CE is the second most important market, after communications which comprises
60 percent of its revenues. CE comprises 20 to 30 percent of the revenue stream for VLSI,
said David Tahmassebi, director of marketing for the consumer digital entertainment division
at VLSI. "We are investing heavily in this area for current, emerging and future applications
in the digital consumer space," he said. "We plan to be a long-term player here and our
investment reflects that position."
Other companies, such as STMicroelectronics and C-Cube are investing more heavily than
that. Although C-Cube participates in the PC market, the majority of its thrust is in the CE
market. STM is heavily focused on the CE market with a majority of its investment targeted
toward emerging and future CE applications. Consumer electronics is the fastest growing
market for STM, said Mr. Pellechia. Over at LSI Logic, the company continues to invest
one-quarter of its R&D resources into the digital consumer applications.
While some applications could come in the form of Internet appliances such as WebPhones
and video conferencing systems, or as smart card or digital camcorders, which are both just
now starting to make it to the market in the U.S., the bulk of the digital consumer market is
expected to be in the common living room applications including digital television, DVD,
home theater, digital surround sound and satellite dishes.
Regardless of the application, component and system companies are competing tooth and
nail to be the innovators and developers of these applications. Digital consumer applications
have just started to make their mark in the electronics industry and with all the promise,
volume and future applications on the horizon, it appears that is just the tip of the CE
iceberg. |
