Semiconductor Group Briefing · Semiconductor Group Briefing BastneSemlceniluctor InBusttvBeacheil Bottom YetP Mary Ann Olsson Birector/Principai Anaiyst Semiconductors Worldwide

DataQuest

Semiconductor Group Briefing

Junes, 1998 Techmart 5201 Great America Parkway Santa Clara, CA C£> GartnerGroup

Has the Semiconductor industry Reached Bottom YetP


BastneSemlceniluctor InBusttvBeacheil Bottom YetP

Mary Ann Olsson Birector/Principai Anaiyst Semiconductors Worldwide

GD GartnerGroup

Bgenaa

• 1998 — Before and beyond

- IVIarlcet

- Products

- Suppliers

• A return to growth

• Market drivers of growth

CD GartnerGroup

Has the Semiconductor Industry Reached Bottom Yet?

Semiconductors.. Jhe Great Balancing net of the Information Ago

<S> GartnerGroup

Highlights Of ttio tasj SemlconguctorMarket

3.5% semiconductor revenue growth $147 billion market Decline and growth for second straight year - ly/lemory ICs led decline (18.6%) - DRAMs declined (20.3%) - Memory and microcomponents lost market share

(54.3% in 1997, 55.8% in 1996, 59% in 1995) - Microcomponents at +18% and analog at +18.7% led

growth PC unit shipments grew 17%

CD GartnerGroup

Has the Semiconductor industry iteached Bottom YetP

1997Semiconductorlloyenuo UyProductTyoo

Bipolar Digital 1%

Optical 4% —

Discrete 10%

Analog

Memory

15%

Digital Logic 17%

Source: Oataqusst

Microcomponents 33%

CD GartnerGroup

S M I H H E S ^

H H market Suppliers. Wm^^J^.

r

WhoGalneil/lostGrouna?

1997 Rank

1. Intel 2. NEC 3. Motorola 4. Texas Instruments 5. Toshiba 6. Hitachi 7. Samsung 8. Fujitsu 9. Philips 10. SOS-Thomson

Source: Oataquest

1996 Revenue 1

17,781 10,428 8,076 7,064 8,065 8,071 6,464 4,427 4,220 4,112

1997 Revenue

21,746 10,222 8,067 7,352 7,253 6,298 5,856 4,622 4,440 4,019

Percent Change

22.3 -2.0 -0.1 4.1

-10.1 -22.0

-9.4 4.4 5.2

-2.3

1997 Market Share (%)

14.8 6.9 5.5 5.0 4.9 4.3 4.0 3.1 3.0 2.7

CO GartnerGroup 982965

Has Ike senicMriiKnir inininr RndMi Bmon YeiP

1997DBÎm-BRM was Ke¥

Microcomponents

Memory

Logic/ASIC

Analog

Discrete

Optical

Total Semiconductors

-40

Source: Dataquest

-30 -20 -10 0

Percent Growth

• 1996-1997 • 1995-1996

-

-

-

^^^J . ' " ' " " •- ^

BT" ^

10 20

CD GartnerGroup

MDeeateo/Pntuetenwn 1997-1997

Microcomponents

Memory

Logic/ASIC

Analog

Discrete

Optical

Total Semiconductors

Source: Dataquest

• 1987-1992

B 1992-1997

60% 0% 10% 20% 30% 40% 50%

Revenue Change over Decade (CAGR %) CD GartnerGroup


Impact Of Growth, 1987to 1997

1987 = $37 Billion

5% i4y„

18%

17%

28%

ajym^- -JiilSK-KSt

1997 = $147 Billion

4% 10%

^ Microcomponents

^^'^^ m Memory ^ ^

• Logic/ASIC

D Analog

El Discrete

• Optical 17%

WorUwUe SomicontluctorForecast

Billions of Dollars

300 J88

1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

Source: Dataguest _ _ _ _

GO GartnerGroup

Has the Semiconductor industry Reached Bottom YeU>

Semieonauctorforecast 1997: matChangeaP

Growth or Component Change (%)

Fall 1997 Forecast +5.6 DRAM Prices -28.9

Yen/Dollar Rate +4.8 (Sept-Dec.)

Non-DRAM Products <i.o Actual Forecast . _

Source: DataquesI __. _ ^ _

CD GartnerGroup 982970

WhatHttUielmlustiyin 199JP

• Excess capacity in DRAMs - Compounded by continued capital spending - Agressive expansion plans

• Severe erosion of desktop MRU prices • Asia/Pacific: Severe setbacks in production,

consumption, and investment

GD GartnerGroup 982971

Has the Semiconductor Industry Reached Bottom YoL^

Impact Of DBMMs

DRAIVI revenue growth declined from -1-81% in 1995 to -38.6% in 1996 Price-per-bit declines, - 1 % , -65%,-59% in 1995,1996,1997 Price-per-IVIB shifts down from $27, $9, <$4 in 1995, 1996,1997 Without DRAM - Total 1996 semiconductor growth >6% - Total 1997 semiconductor growth >8%

DRAM share of market drops to 14.3% in 1997

(S> GartnerGroup 962972

Bevenue forecast by Quarter

Millions of Dollars 45,000fr

Sounse: Oaiaquast

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 04 Q1 Q2 Q3 Q4

1995 1996 1997 1998

CS> GartnerGroup

Has the Semiconductor Industry Reached Bottom Ye£>

Beyenue Growth bif Quarter,

Growth over Previous Quarter (%) lOi Q1 = -2,5%

Q2 = 6.1%?

• Forecast

D Scenario

Q2 Q3 Q4 Q1 Q2 03 04 01 02 03 04 01 02 03 04 1995 1996 1997 1998

AGR = 37% AGR = -6.2% AGR = 3.8% AGR = 5.52% to 8.2%

Source: oataquest GE) GartnerGroup

WhaiHamenea during first ant Secant Quarters at 19989

DRAM price pressure still very strong! - Popular 1Mx16 In Q1, Q2, year-end: $3.50, $2.75, <$2.25 - 4Mx16 transition Q1,Q2, year-end: $24, $15, ^ 1 0

Capital spending in Korea is dead. What are the chances for a Q4/98 revival? Trade-intensive Asia/Pacific is depressed, but China and Taiwan appear stable Worldwide PC units keep pace (14.4%), while ASPs suffer Recovery: When? How?

GO GartnerGroup 982975

Has the Semiconductor Industry Reached Bottom YetP

ÎTZ"-' i • liJiJiH..!:".:: "

^ ^ If^ven f fe^Ô g99it k ne i i ' f^HHBF • J

Billions of Dollars

Memory iCs Micro ICs Logic/ASICs Analog ICs Discrete Optical Total

Source: Dataquest

00 Forecast tyProHuct 01999

Growth 1998 Rate(%) 1999

31.4 55.5 26.6 24.0 15.2 5.4

159.2

1.4 13.5 7.3

10.8 6.8 1.3 8.2

39.7 66.0 31.1 27.8 16.9 5.8

188.3

Growth Rate (%)

26.6 18.8 17.0 15.7 11.3 7.0

18.2


lona-Baage Forecast by Prottuct: M Return to Browtn

Billions of Dollars

120

1995 1996

Source: Dataquest

1997 1998 1999 2000

Micros

Logic/ASIC Analog

2001 2002

<S> GartnerGroup 982977


RegionalRevenue forecast

Billions of Dollars

laOn

100

80

60 -

40 1

20 '

• Americas -^- Japan

• Asia/Pacific - ^ Europe

1997

SoLiFce; Oaiaqusst

199B< 1999 2000 2001 2002

03 GartnerGroup

SetnteontluctorMarltet Drivers: Consumer

More '^

Sophistication

Te ephone

Less

Voice OVOftectognition

1876 1928 1950 1960 1970 1980 1990 2000 1896 1945 1957 1968 1975 1985 1995

Source: Dataquest GO GartnerGroup

Has the Semiconductor Industry Reached Bottom Ye^

Conclusions

Long-term system markets support chip industry expansion of 14 to 18% CAGR

Market driver growth will be concentrated in the top two dozen applications

2002: A $290 billion semiconductor market will be the foundation under the $1.25 trillion electronic equipment edifice

GO GartnerGroup gs29sa

Notes

1,

^^^^^^^•^^^^^^^^^•^•^^^^^•^^•••^^^^^^^^^l

How Will PC System Price Erosion Impact Semiconductor SuppliersP

-^J^î'^-^m

(S> GartnerGroup


HowWillPCSjfswm Price Erosion Impact Semlcomluctor SuppliersP Nathan Brookwood Principal Analyst

MgenHa

Are PC prices falling?

Why are they falling?

On whom are they falling?

Where will they stop falling?

When will they stop falling?

GD GartnerGroup


Datanuesfs PC Unit forecast Steady as She Bees

4/97 Forecast • 10/97 Forecast C3 4/98 Forecast

Thousands of Units

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

Source: Oataquest

1996 1997 1998 1999 2000 2001

<S> GartnerGroup

Dataauests PC MSP forecast' nose Were the GootI CM Days

Dollars

2,500

2,000

1,500

1,000

5001

4/97 Forecast

10/97 Forecast

4/98 Forecast

1996 1997 1998 1999 2000 2001 2002

Source: Dataquest <£} GartnerGroup


Baiaauests PC Kevenue Forecast' mere Have Ul the Dollars Gone?

Billions of Dollars 350

300

250

200

150

100

50 1

0

4/97 Forecast • 10/97 Forecast G 4/93 Forecast

1996

Source: Dataquest

1997 1998 1999 2000 2001

( 9 GartnerGroup

mniats Causing PC Price Erosion?

Shifting product mix - More low-end boxes - Fewer high-end boxes - Lacl( of computationally intensive "idller

applications" lets users "buy down" Lower prices for low-end systems: The"sub-$1,000PC" Product definition - Former buyers of high-end PCs now buyers of

workstations - Windows 95/Windows NT continuum

CO GartnerGroup


wnatsbeliinil PC Price HeUuctionsP

Demand side - Lower prices permit sales to lower-Income

households - Lower prices encourage multiple units per

household, business establishment, and classroom

Supply side - Supply/demand imbalance in key component

markets (DRAM, SRAM, hard disk, CD-ROM) - Intense market share competition as market

consolidates

(S> GartnerGroup 9S29S7

On Whom Do PC Price BeHuctlens nilP

PC system vendors: The vendor with the lowest overall cost structure has enormous advantages - Marketing and distribution expenses - Inventory carrying expenses and

write-downs - Operational logistics

CD GartnerGroup


OnWhomBoPePme Reductions rallP

PC retailers - Lower revenue per end-user sale - No reduction in sale-related expenses


OnWhomDoPCPnce Reductions fallP

Component suppliers: Feeling the systems suppliers' pain - Microprocessor suppliers

(product mix) - DRAM suppliers (oversupply) -SRAM suppliers (oversupply and buyer

concentration) - Hard disk suppliers (oversupply) - CD-ROM suppliers (oversupply)

CD GartnerGroup

How Will PC System Price Erosion Impact Semiconductor SuppiiersP

Desktop anUMobile MPURevenue Brewing Only 8% per Year

x86 Revenue ($M)

40,000

35,000

30,000

25,000

20,000

15,000

10,000 -

5,000

• Mobile

m Deskbound

Source: Dataquest

1997 1998 1999 2000 2001 2002

Q} GartnerGroup

Totalx8B Compute MPUMarket •^'' mi Grow 15% per Year

x86 Revenue ($M) 40,000

Upgrade + Others • Workstation D MIdrange • Server PC m Mobile M Deskbound

1997

Source: Dataquest

1998 1999 2000 2001 2002

GO GartnerGroup

How Will PC System Price Erosion Impact Semiconductor Suppliers?

Intel Can erewxSBMPUnevenue atl3%nerYear

x86 Revenue ($M) 40,000

I Upgrade + Others I Workstation

D Midrange I Server PC

H Mobile M Desldjound

1997 1998 1999 2000 2001

Source: Dataquest

2002 GO GartnerGroup

Intel's x86 Demnetlters Ban Brew 32% per Year ana Bain Market Share

x86 Revenue ($M)

7,000 W Upgrade + Otiiers • Worlcstation • Midrange • Server PC EH Mobile @ Deskbound

1997

Source: Dataquest

1998 1999 2000 2001 2002

CO GartnerGroup 9S2994


BRMMPmes Kave Fallen Preelmtously

Pibe:per

"m: •THSiifra^-'bs-isiK^w

;P47 w j']iT!kji wi j]i j j ' ] .ij(s>;i:i) !t^t.l' i>j it i0' i i | t. i J). I. j i . raf j . ijt-i ; i i i i i i . - • •"••" i t i i s • • • • • • • ''^sm•- -• ' - 'am"- ••': ' ' ' ^ „ ,

-.1 .-..,... . -.•jJiBij^-

03 GartnerGroup 9e£99S

M DBJUl/lRevenue/System Deium 50% Despite 500% Mere MB/Smem

Dollars per Megabyte Megabytes per System 60'

Dollars per System

300

1994

Source: Dataquest

1995 1996 1997 1998

GD GartnerGroup

How Will PC System Price Erosion Impact Semiconductor Suppliers?

WhoBenents from lower PC Prices?

System purchasers Unit volume-sensitive suppliers - Software companies - Publishers - Content providers - Service providers - Infrastructure providers

(S) GartnerGroup 982997

ymgj imSf t TpF

flcti-'^'

How low Can PC Prices fall?

Today's Cost ($)

MRU IMain IMemory Other IMemory Otiier Semiconductors Other Hardware •Mass Storage Total: Component MVA/Shipping Total: COGS Factory Gross Profit Factory Price Channel Gross Profit End Sale Price

Source: Oataquest

90 75 15 77

125 200 582

65 647 181 828 166 994

End-User Price (%)

9 8 2 8

13 20 59 7

65 18 83 17

100

Aggressive Cost

Reduction ($)

50 35 12 60

100 145 402

55 457

91 548

82 631

End-User Price (%)

8 6 2

10 16 23 64

9 72 14 87 13

100

QD GartnerGroup 9S2998

How Will PG System Price Erosion Impact Semiconductor Suppliers?

When Will Pe Prices Stop falllngP

Newton's law: An object in motion tends to stay in motion - Prices will fall. . .

... until they reach an economically unsustainable level or ... until another force acts to stop them

GD GartnerGroup

Summary

Lower prices have permanently altered the PC market landscape Lower prices permit continued unit growth of about 15% per year The lower ASP results from both a shift in mix and lower low-end prices Suppliers in volume-sensitive markets can benefit Suppliers with low-cost financial and operational infrastructures will gain even more share

GD GartnerGroup

Notes

Notes

i'

^^^^HH^H^^^^^^^^^H^^^^^^^^^^^^^^^^^^^^l

System-level Integration: Changing the Structure of the ASIC Industry


S]fstem4euel IntegraUnn: Changing the Structure elttieASICInaustry

Jordan Selburn Principal Analyst

® GartnerGroup

Agenia

SLI trends and forecast SLI manufacturing ASIC intellectual property How to win in the SLI market

CD GartnerGroup 9S285S

System-Level Integration: Changing the Structure of the ASIC Industry

1997: The Year Of Systems Intearatlon

Concepts from 1990 are seeing silicon - SLI process technology and

manufacturing are maturing - System-level macros are becoming

widespread - Applications require SLI

Great news: IP owners can reap systems profits Bad news: It can put you out of business

CD GartnerGroup

WhatlsSystem-leyel imegratlonp



System-leyellntearaaoii: "laws afttieWOOsP

Microprocessor

Analog

GD GartnerGroup

ynyEmheilP CxamplC'DIUM

Cut system cost - 1Mb embedded may be cheaper than 4Mb

to 16Mb external - 1Mb of fast SRAM may cost too much Reduce power consumption Reduce chip count Reduce I/O count on ASIC Increase bandwidth significantly


System-Level integration: Changing the Structure of the ASIC Industry

mMHotlmbeUP ixatnpleDltMllll

• Expensive! - Standard DRAM is a commodity

• Competitive sourcing • IHigh run rates

- Embedded DRAI\/I is custom • Limited sourcing • Low run rates

- Embedded processes are complex • Complicates design and test

- Slower time to marltet CDGartnerGroup

DRAM Cycles: When to EmbettP Price ys. Cost of Discrete DDAH

Price per Megabyte ($) 50

Bad Times to Embed*

1991 1992 1993 1994 1995 1996 1997

GO GartnerGroup


neMSICPmluct: 1985

Custoi ner^ Design

Cell Libraries Memories

SLMs

Design Tools end

ASIC Vendor

Siiicon ManufacUiNog

LirtMi

Assembly and Test

n&n

Finished Part

COGartnerGroup

The ASIC PmlUCt:2899P

Custo, Den

Design Tools and

Methodology

'eimtofs

Silicon Manufacturing

ASIC Vendor

Assembly House

Assembly and Test

R&D

Finished Part

<S> GartnerGroup 982863


SU WillBemiaateASie Revenue

1997

Non-SU 80%

Market Size = $15 Billion

2002

Market Size = $36.8 Billion

GOGartnerGroup

The UerUwUeFouniryMarket

1997 2002

$5.6 Billion CAGR 22% $15.2 Billion

(X) GartnerGroup senses

System-Level Integration: Changing the Structure of the ASIC Industnr

FoumfnfManufacture Of Sit Drivers antflnuaitors

Financial Crisis in

Asia/Pacific

Low Revenue per Square Inch

Lack of Adequate

EDA Solutions

Process integration

issues

International VSIA Sematech

Success

Expanding ASSP Marltet

Escalating Fab Costs

Accelerated Technology Development of Foundries

GOGartnerGroup

escalating Cost ol Fait Construction

Millions of Dollars 2,000

1,500

1,000

500

30,000 wpm

20,000 wpm

1.2)jm I.Opnn 4/5-Inch 5/6-inch

1983 1987

0.8Mm 6-inch

1990

0.5pm 6/8-Inch

1994

0.35|jm 8-Inch

1997

0.25Mm 8-Inch 1999


System-Level Integration: Changing the Structure ef the ASIC Industry

SemlcanUuctoi'Design Market Segmentatien

EDA and Third-Party Libraries (Foundry

Manufacturing)

Low-End" Designs

ASIC

"High-End" Designs

O E M

CD GartnerGroup

Sifstem-levelMaere Seenarie

Foundries will liave access to a broad range of SLMs In-demand SLMs will quickly become commodities - Value added will decrease rapidly - Most value will flow from semiconductor

manufacturer to SLM owner "Generic" SLI designs wiii compete primarily on price - Advantage: The foundries

GO GartnerGroup


founUn Scenarios

Foundries will enjoy a manufacturing cost advantage with: - Economies of scale - High factory utilization rates

• Depreciation cost amortized over more units - Improved manufacturing efficiencies

• Optimized process flows • Reduced cycle time • Factory automation

Foundries will be able to accept the lower revenue per square inch that is inherent in SLi designs


tSIBVenHor Scenarios

Niche applications can benefit from an optimized silicon process - An example is transistor speed vs. leakage

current - Wireless/portable designs can trade unneeded

performance for reduced power dissipation - Workstations can trade power for higher

performance Foundries focus on the broad market's requirements - Foundry mainstream market ASIC vendor's

targeted customers CO GartnerGroup 9B2871

System-level Integration: Changing the Structure of the ASIC Industry

ASIGVenilois Will Develop Sjistems Expertise

System ^ ^ Knowledge

Systems OEM

Foundry ASIC Vendor


MSlCUenHorScenanes

Optimize fab utilization - Foundry business can absorb fab's fixed

costs and improve profit margin of ASIC business

Lead in process technology by ASIC vendors allows production of smaller die - Short-term advantage only; TSMC almost at

parity Downside: Fab full of foundry business may block more lucrative ASIC designs

GO GartnerGroup


^ ' i i ••f.;:;;;;'%:%'-^

1 1 ^ ^ ^ : !.::M MSICVenHor Scenarios

ASIC vendors can concentrate on their value-adding capabilities - Manufacture only those designs where

process technology allows differentiation Innovative partnerships will facilitate new business models - Joint process development with the foundry

for base technology - Use foundry for buffer capacity to ride out

business cycles - Second-source capability attractive


'•^

Semlconiluctoi'Intellectual Pnnetfy

What is IP? - Whatever the customer will pay a higher

gross margin for - Can include library elements, SLMs, process

enhancements (Cu interconnect, flash, etc.) and more

Two categories of IP - Portfolio IP: required for the majority of

system-level designs - Application specific IP: for targeted markets



MUlna Value Uinugh IntellectualPnnerty

Process and manufacturing enhancements - Allow higher performance, lower power and cost - Controlled by semiconductor vendor

System-level macros, optimized libraries - Design reuse for fast time to market, conformance to

standards - Owned by developer of SLM/library - Can be OEM, semiconductor vendor, or third party

Methodology - Can speed design cycle, improve performance, etc.

Most IP, manufacturing, etc., is commodity Owners of noncommodity IP can capture end-system revenue

GOGartnerGroup 9S2876

IntellectualPreperty: The GeUBushls On

Example: Intel microprocessors Average PC prices are about constant at approximately $2,000 Intel microprocessor ASP increases from $177 (1994) to $230 (1997) Result: more of the PC revenue dollar in Intel's bottom line



TluW-PamiP

Total IP market will hit $2.3 billion in 2001 - Split between ASIC companies and third parties - Majority of revenue is "hidden" by ASIC

vendors Major players - Who is the biggest? Surprise—SGI! - Processors: ARM, DSP Group, Hitachi - Memory: RAMBUS, Artisan - Logic, l/Os: Aspec, Sand, Virtual Chips

VSIA could turn garage shops into major players overnight

CO GartnerGroup 982S78

IP life Cycle

Availability Usage IP Owner Silicon Vendor Example

Introduction

Adoption

Maturity

Standard

1 owner, few silicon vendors, few substitutes

1-2 owners, several vendors, some substitutes

U owners, many vendors, widespread substitutes

Public ownership, most vendors offer

Limited number of applications

Applications increasingly benefit from on-chip Integration

Majority of applications benefit from on-chip integration

Standard feature of many designs

High value capture

High value capture

Decreasing value capture

Continuing decrease of value capture

High value capture

Decreasing value capture

Little, if any, value capture

Little to zero value capture

Embedded flash

Oak DSP

ARM processor

PCI I/O



li* i f . • - • • • . . '••>•••; : IP Owners: Top of ne Device foon

Chain!

GO GartnerGroup

An Sli Scenario: When the Dust Semes

Virtually all ASIC designs are system level Drastically changed semiconductor landscape - A few semiconductor foundries, very large - A few large conglomerates with both design

and manufacturing - A number of design houses/OEIVIs fighting to

control IP - Very few to no dedicated ASIC vendors

CD GartnerGroup

System-levei integration: Changing the Structure of the ASIC industry

SUManufactunng: TheFounHiy Persnectiue

Today's concentration of capital and the importance of manufacturing technology is driving the shift to the foundry model Design integration and tool availability gives foundries access to SLI designs Partner with third-party design houses and IP providers to compete for highest value SLI designs Foundries are best suited to meeting the challenge of manufacturing SLI at a low cost

CD GartnerGroup

SU Manufacturing: The ASIC VenHarPerspective

ASIC vendors are seeking ways to survive competition from the foundries by: - Concentrating on value-adding competencies - Avoiding competing solely on price - Manufacturing for specific markets

If ASIC vendors target the right application markets, they can thrive ASIC vendors that are trying to be everything to all customers will fail



SU Manufacturing: The IP VenUur Persnecttve

Avoid the temptation to become a manufacturer Maximize return from IP - Recognize the realities of the product life

cycle - Get in early to avoid competing on price - Manage the distribution channel before it

manages you Provide a comprehensive portfolio of IP for targeted applications Establish close relationships with third-party design houses


SUmanufacturing: Tiie OEM PerspecOue

Outsource manufacturing to the foundries for the lowest-cost products - Take the IC design function in-house or give it

to a third-party design services company • Lower the cost of designs • Maintain control of value-adding system-

level IP • Today, foundries are starting to offer turnkey

solutions (e.g., wafer fabrication, packaging, assembly and testing services)

Partner with ASIC vendors for application optimization

CD GartnerGroup


Notes

• '

i'

^^^^^^^^HH^^^^^^^^^^H^^^^H^^^^^^^^ÎHi^^^^^l

Is the PCS Industry Going PCP


Technology UpHate

IsthePCSInttuBtnGgingPC?

Dale L Ford Principal Analyst GartnerGroup

C ^ G a r t n e r G r o u p

Ogmmnnlcnttgns Bemleengucter nevenne lllllHTen$Sigilllenln2gg2

Billions of Dollars 60 T

^

P?

P^

4- -+-1995 1996 1997 1998 1999 2000 2001 2002

B Other Communicafons

Q Broadcastand Studio

E3 Mobile Communications

• Public Telecom

@ Premise Telecom


Is the PCS Industry Going PC?

Digital Cellular HanHsets ana Mobile Inlrastructure Total $164 Billion In 2002

Billions of Dollars 20 T

$11.ee

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

B Olher Mobile

\ Mobile Communications Int^sfuclure

1^ Pagers

I Digital Cellular

Q Analog Cellular

GO GartnerGroup

Regional Markets lor Blaltal Cellular

1997—Europe Still No. 1 Market - GSM900/DCS1800

U.S. market currently smallest but growing fast - TDMA re-energized by IS-136 - CDMA ramping aggressively

Japan continues surprising growth with high upgrade rate - PDC challenged by CDMA

Asia/Pacific biggest market by 2000? - 1998 Asian financial crisis and

CDMA delays in Korea

Americas Japan

Asia/Pacific Europe, Africa, and Middle East

1997 Total Production = 98.6 Million Units

GD GartnerGroup

Is the PCS Industry Going POP

Digital Cellular OBHIs ana Pnituction

Europe is major production region, 1996 to 2001

Trend is regional production for regional markets - Nokia—Finland, Germany, United States, Korea - Motorola—United States, United Kingdom, Germany, Malaysia - Ericsson—Sweden, United Kingdom, United States,

Hong Kong

An emerging challenge to "tier one" players - 1997 shai«: Ericsson (19.2%), Nokia (18.8%), Motorola (14.7%),

Matsushita (6.9%) - Rising challengers: Sony/QUALCOMM (6.2%), Samsung

(5.6%), Siemens (4.9%), NEC (3.3%), Phtiips (2.6%), others

; ,-MV: '•n7'~am\ ,:.4mi'^^:^^^:m^ (S> GartnerGroup 982940

Cellular ana BroaHliaml PCS Production nnuroaciiino 295 Kllliion Units hy2002

Millions of Units 350 T

Billions of U.S. Dollars 14

1995 1996 1997 1998 1999 2000 2001 2002

• • O t h e r Digital

^ Personal Digital Cellular (PDC)

^ C D M A ( I S - 9 5 )

E=3TDMA(IS-54/136)

^ GSA/VDCSiaOO/PCS 1900

E S Analog (AMPS, TACS, NMT)

- * - Semiconductor Revenue

GO GartnerGroup 98294^

Is the PCS Industry eolng POP

Sinwilllea Schematic el Cellular HanasetBlock DIauram

Key design drivers 1995 • Transition to digital 1996 • Eniianced fuil-rate/

iiaif-rate vocoders 1SSZ • Dual band 1998 • Targeted addition of

new features/ Smartplione Constant

• Lower cost • Lower power

consumption • Size and weight

CD GartnerGroup

Cellular Service PrevlHers'Beuulreil Featurellst

Near term - Short messaging service (SIVIS)/cellular paging - Over-the-air activation - Smart card usage - Caller identification - Voice mail alert and callback/answering machine-type

capability - Voice-activated dialing

• Can be implemented in hardware or by the service provider

Longer term - Enhanced data communications capability -GPS

CO GartnerGroup

Is the PCS Industry Going PC?

• ^ ^ ^ • ^ ^ • ^ ^ ^ • i s ^ ^

Digital Cellular HanHsetCvoluilon

Baseband

R F / I F

Power Amplifier

Aiwoge S«mtcoi4Jcl<ir CcB[ {S)

A w r a ^ Factory Price {$)

Fuiyiliarrilty Typical StandDy Time" Typical Talk Time"

Feature Enh^cffnenta

1»3

Six or seven ICs plus memory chips

More than ISO dscrates

Nonmondithic power amplifier

175

7sa

>2 houn 1 hour

1W4

Five to six ICs plus four memory

chips

Eight to nine ICs plus SO to 75 dscrates

Hybrid module power amplifier

125

504

20 houra S houn

ShQit Tnenaoi'^

nge

Three to five ICs plus three memory

chips

Four to sewn ICs plus 30 to 60 discretes

Module and monolithtc power amplifier

92

» £

^ h o u m 3,5 hew?

Enhanced %ol£» quality

1BH

Ihree ICs plus two to three

memory chips

Four to seven ICs plus 20 to 25 discretes

Module and monolithic power amplifier

82

241

150 hours Stiours

IniaiTiBt aci^fiâ

20OO

One to two ICs

plus two memory

chipe

Three to five ICs pl i4

l O t o l S d s c r e t e s

One to two power amplifiers

la

175

3S0 hours

8 hours

Enhanced data

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"Averages are based on standard batteries. Extended times can be achieved through optional extended life batteries.

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OnUieHarlion: ThM-Generatlen Cellular

UMTS/FPLMTS telecom requirements

• Voice, data, and multimedia (video and graphics)

• Quality and services same as fixed lines

• Data rates up to 2 IVIbps in micro and pico cellular areas

• Compatibility with ISDN, B-ISDN, and ATM

• Migration path from second-generation cellular


is the PCS Industry Going PC?

Cellular/PGSlnilusmStniciure Transformation Proprietary Vertical Integration

Traditional Teieconfi Providers •••' :K,.;.S;:;;;;:;;;!!;:KJ;;Jt;;;;,:;, .KSiffiiSEiSKSHSSS;;!^':'" "

• • • • Reduced Intense Global

Open Horizontal Excellence

Wal-Msrt Radio Shacti Circuit City

Time Warner Ceiluror One

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Regulatory Technology competition Markets Barriers

CHANGE AGENTS

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^ GartnerGroup 982946

ThB Value enalH sum la wireless Commum'cattens

Chip Suppliers Handset Vendors Service Providera

Past Jrtir^truvtis*' drptcvmeirt:,

fla&e 5tal)nr)» rfl^'jrhifHi «T1«^^5^w* ether Hrf^MUVimt e»p)1pTn?iiL dflLihEifVî pfpOiJ^t^r.

Infrastructure Suppliers

Chip Suppliers Handset Vendors Service Providers

Current/ Future

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Infrastructure Suppliers

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Cest Pressures In the PCtSJ Market

Labor. Mechanicals, PCBs, etc.

Semiconductors

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i ^sssMt

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^ p - T ^ ^ Labor, Mechanicals, PCBs, etc.

f"î PeHphEraSs ' •

Semiconductors

Cost Pressures on Digital Cellular/PDS HaaUsetSemlcoBUuctor Content

Average Digital Handset Semiconductor Content ($)

Technology/Standards Evolution

1993 1994 1995 1996 1997 1999 2000 2001 2002

GD GartnerGroup


Ualor Cellular Semicomlucior VenHors

Baseband ASIC/ASSP/chipset - Texas Instruments (1) - Lucent Technologies (2) - Analog Devices - Motorola (8) - QUALC0MM(3) - SGS-Thomson - VLSI Teclinology (4) - Siemens (6) - Philips (7)

(1997 Digital Baseband Rank)

- AKM Semiconductor (Asahi Kasei) - Mitel (GEC Plessey) - IBM (CommQuest) - Hitachi - Oki - NEC (5) - LSI Logic - DSP Communications - Samsung

CD GartnerGroup

M Virtual nree-Way Tie for Mo iin wireless Communications SemiconHuctors

Wireless Semiconductor Share 100%-r

1995

0???

@ Others

m Toshiba

• Hitachi

m Lucent

• SGS-Tlionison

• Fujitsu

• Texas Insirumenis

0NEC

• Siemens

m Philips

m Motorola

Note: Represents market share for analog and digital cordless and cellular, pagers, and wireless LAN semiconductors. Does not include infrastructure, memory, or opto. GO GartnerGroup

982951

Is the PCS Industry Going PGP

neComnetttlon Heats Up

Millions of Dollars 12,0UU -

10,000 -

8,000 -

6,000 -

4,000 -

2,000 -

0 -

- H ' B, ^m—1—

H

1 •—1—i^ -^ i— \—

IS J M W H T O M

1¥^ i 4

— 1

1994 1995 1996 1997 1998

0 7??

@ Others

H Toshiba

• Hibchi

Q Lucent

• SGS-Thomson

• Fujitsu

S Texas hstruments

@NEC

i i Siemens

• Philips

E3 Motorola

GD GartnerGroup 9829S2

OnlyfocuseUGommitorsHeeUApply

Revenue for Wireless Communications Semiconductors

General Purpose

10%

GO GartnerGroup

Is the PCS Industry Boing POP

Summaiy

• Digital cellular: Pressured profits and greater responsibilities

• Third-generation cellular: The competition has begun

• Looking for the next killer app beyond voice

• Only the fit and focused will win

QD GartnerGroup

Notes

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Notes

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Documents

Semiconductor Group Briefing · Semiconductor Group Briefing BastneSemlceniluctor InBusttvBeacheil Bottom YetP Mary Ann Olsson Birector/Principai Anaiyst Semiconductors Worldwide