Broadband Opportunities: New Semiconductors

Report Highlights

• Sales of semiconductors for broadband applications reached an estimated $5.8 billion in 2001 and are expected to rise at an AAGR (average annual growth rate) of 17% to $12.6 billion in 2006.
• Logic chips will remain the largest single product category, accounting for just under $4 billion in 2006 while growing more slowly (14.3% AAGR).
• Memory chips will continue as the second largest category, growing at a 17.7% AAGR to reach $2.55 billion in 2006.
• Optoelectronic chips will grow at a 22.4% AAGR, the fastest of any category, to reach just under $2 billion in 2006.
• Growth drivers include DSP (logic), set-top boxes, 3G wireless networks and PDAs (memory), packet-switched networks (analog), fiber-optic, (optoelectronic) and DSL (specialized ICs).

INTRODUCTION

OBJECTIVES

When Bell Labs first publicly announced the invention of what they described as a "little-bitty thing," called the transistor, in June 1948, the development was treated as an inconsequential matter by news media and the world. The New York Times, for instance, treated the new technology not as front-page news or even a feature story, but as a tiny filler announcement buried in the back of the paper. Even the boldest visionaries of the day were scarcely aware that over the next few decades this modest device, two wires on a sliver of germanium, would revolutionize not only telephone networks and radio, but the entirety of electronics, communications, and, through the computer, information technologies as well.

As arguably the single most pivotal technological breakthrough of the second half of the twentieth century, advances in semiconductor technology have provided the essential underpinning for a still-continuing succession of commercial and technical breakthroughs. These have spanned telecommunications, radio, television, as well as mainframe, mini-, and personal computers. More recently, these breakthroughs have also included Internet-access technologies and applications, and now include next-generation high-speed broadband-access networks.

Each stage in this evolution has been driven by a process of relentless 'miniaturization,' which has come to be described by Moore's Law (named for Gordon Moore). Moore's Law states that the number of components on a silicon chip will double every 18 to 24 months. This has resulted in the constant, often volatile, reinvention of the industry, driven by exponential growth of processing speed, increase of capacity, and corresponding lowering of price per component.

The four-bit 4004 semiconductor design developed by Intel in the early 1970s, which used about 2,300 transistors, has given way to 8-, 16-, 32-, and, most recently 64-bit microprocessor architectures now running at up to 10 million or more transistors per chip. This has enabled the development of a wide variety of functional categories of semiconductors, including logic, memory, analog, and optical chips, along with integrated circuits. These are now used in a panoply of end-use devices and applications, from desktop, notebook, and handheld computers to cell phones and MP3 players.

This report will explore the historical evolution and unique structure of this still-evolving industry, with particular focus on its most rapidly growing sector, design of semiconductors for broadband-enabled devices or applications. These include DSL, cable or wireless Internet connectivity, optical networks, and multimedia applications, such as streaming audio and video. This report will also explore the industry's most recent technological and market dynamics.

REASONS FOR REPORT

The semiconductor industry has been a protean generator of new companies, technologies, and market niches since its inception four decades ago. While most industries have long since reached staid maturity by their fifth decade and are dominated by two or three major players, the semiconductor industry consists not only of giants such as Intel and Texas Instruments, but hundreds of other semiconductor device designers. Several dozen companies thus far have gotten involved in designing and developing chips that enable high-speed Internet access and applications.

This report is designed to be useful to marketers in the microprocessor and broadband access/application development community. Its goal is to help them grasp the key trends and trajectories that shape new broadband networks, and realize the growth opportunities for semiconductor vendors.

CONTRIBUTIONS

This study delineates the most critical developments in broadband enabling and enhancing semiconductors over the past several years, tracing the history of the field as well as reporting on the current state of the art. It will examine the near-term commercial opportunities and challenges of several different technologies and products that are designed to provide either broadband access or to enable broadband applications. Through the study of historic patterns as well as new and impending technological breakthroughs, forecasts are made of dominant marketing expenditure trends projected from 2001 to 2006.

SCOPE

This Communications Co., Inc. (BCC) report includes all aspects of broadband semiconductor technology, including advanced integrated circuits, analog chips, logic, memory, and optoelectronics (an area we project currently accounts for about 5% of all semiconductor revenues, but will by 2006 account for over 15%). It does not include discrete semiconductors designed for nonbroadband-equipped electronic devices (i.e., pre-2.5-generation cell phones).