As a counterfoil to a slackening economy, chip makers are striking up alliances, shrinking their product sizes and paring down prices to differentiate themselves in the face of layoffs, reduced spending and plant shutdowns.
Some of the alliances are between NEC Corp. and Taiwanese Semiconductor Manufacturing Co. Ltd.; Agere Systems and RF Micro Devices; TriQuint Semiconductor Inc. and Sawtek Inc.; Toshiba Corp. and Sony Corp.; Texas Instruments and ParkerVision; PrairieComm and ParkerVision; Intel Corp. and Analog Devices Inc.; and the trio of Toshiba, Sony Corp. and IBM Corp.
“These alliances reflect what we expect in the future,” noted Natalie Amiama, communications technology analyst for Allied Business Intelligence, noting two general types of relationships. “They are leveraging each other’s strengths for a more complete solution.”
The first of the two types of alliances is between radio-frequency and interference-frequency components. In the other, she said, the companies are inspired by radio frequency for high-performance chips. She said the TriQuint-Sawtek tie-up falls into the RF-IF description, while the Agere-RF Micro Devices deal fits the high-performance chips bracket.
“The alliances are the first steps toward a new model of phones and indicative of the revolutionary concept where conventional cell phones will no longer be the case,” she said.
Under the deal between Agere Systems and RF Micro Devices, both companies will work together on a class of chips based on emerging semiconductor technology called silicon germanium for wireless applications. RF Micro Devices will invest about $58 million over two years to purchase semiconductor manufacturing equipment for Agere’s facility in Orlando, Fla., and also upgrade manufacturing clean room space.
NEC agreed to jointly design the rules for micron chips with TSMC, the world’s largest contract chip maker, to be rolled out in the first quarter of 2003.
“There’s not much difference between standard devices,” said Osamu Kudo, an NEC general manager for device development. “The competition is only in terms of speed.”
PrairieComm and ParkerVision agreed to jointly develop advanced and reference designs for CDMA cellular handsets and other wireless devices, while Texas Instruments is partnering with ParkerVision to develop interfaces between the next-generation D2D transceivers and TI’s digital baseband processors. Both companies also agreed to jointly develop and market chipsets for wireless networking and next-generation handsets.
Some of these alliances are inspired by the drive to roll out smaller chips as part of the industry focus on smaller mobile phones and other wireless devices.
“It’s extremely challenging to work toward finer geometry and maximizing space in the devices,” said Amiama. “They are pursuing shrinking without compromising quality, especially with multiband and multimode phones. It will be interesting to see how they approach this problem.”
NEC is teaming up with TSMC to unveil next-generation 0.10-micron chips for 2003. Toshiba’s alliance with Sony also is geared toward developing 0.10 and 0.07 micron processors and develop technologies for large-scale integration chips.
In order to secure better inroads in the market, the companies have resorted to price cuts. Nothing dramatizes this more than the price war between Intel and Advanced Micro Devices. Intel cut the prices of its microprocessors from between 11 percent and 37 percent, while Advanced Micro Devices said it aims to garner 50 percent market share, and price is believed to be one of its strategies.
These decisions are seen in the contexts of plant shutdowns. Fujitsu and NEC shut down some of their plants, while Toshiba and Hitachi Ltd. have indicated similar plans. Mitsubishi Electric Corp. is in talks with its unions as a prelude to a decision.
In spite of the bleak market, Allied Business Intelligence envisions a rosy market in years ahead. “Enhanced demand for enhanced cellular handsets will fuel new growth for participants in the components sector,” said the firm in a news release. But it offers a cautionary note. “The ability to react quickly and accurately will profoundly impact vendors’ long-term prosperity,” said Amiama, the report’s author. “But strangely enough, in a business noted for enabling communication, circumstance has to force industry participants to cooperate.”
