AUGUST 1--With telecom titans falling all around us, there is a much smaller population of healthy operators to buy equipment. And that has had a dramatic effect on the digital-signal-processing (DSP) market, according to Will Strauss, president of Forward Concepts (Tempe, AZ; www.forwardconcepts.com). Shipments of programmable DSP chips to the wireline market dropped 62% in the first five months of 2002. Moreover, average selling prices (ASPs) have dropped some 20% compared with the same period last year. Consequently, DSP shipments for wireline applications now constitute only 6.4% of the DSP dollar market, compared with 11.3% for all of 2001. Although there are pockets of telecom growth, the big-iron market will have to wait until at least mid-2003 for a sustained recovery.
On the other hand, DSP shipments to the wireless market are up a healthier 15%--moving its share of the DSP market to a record 60%. But Forward Concepts projects only a 4% growth in cell-phone unit shipments, to the 405 million level, this year. Wireless-infrastructure growth has stalled, with 2.5-generation and "3G-lite" slowing down and UMTS third generation being pushed out by nine to 12 months. Accordingly, Forward Concepts expects DSP revenue into the wireless-infrastructure market to decline by some 5% in 2002.
Meanwhile, the average selling price of DSPs into the wireless market is actually increasing; up some 13% for the first five months of 2001. Unfortunately, that increase is the key to most of the revenue growth thus far this year. The ASP increase can be attributed to the increasing DSP (and RISC) processing capabilities required for 2.5G (over 2G), in terms of clock speed, additional on-chip multiplier-accumulators, added accelerator cores, and additional on-chip memory. With even more processing capabilities and resources required for 3G "heavy," Forward Concepts sees ASPs for this segment continuing to rise for at least the next few years before leveling off.
Dramatic changes have taken place in the geographic makeup of DSP shipments. China and Korea are now the biggest market for DSP chips, while shipments to Japan have fallen 54% in the first half, moving the country from a 15% market share in 2001 to just more than 9%. The Asia-Pacific DSP market, on the other hand, has risen from 33% in 2001 to an unprecedented 42% for the first five months of 2002. The US market share is now down slightly to 21%, and Europe (thanks to GSM and 2.5G) has increased to almost 28% of the DSP market.
Forward Concepts has lowered its earlier 15% DSP market growth forecast for 2002 to 5%. "Because we don't see an early turnaround in wireline, we're muting our earlier 2003 forecast for the segment to 20%, from 33% initially," says Strauss.
The company expects a healthy pickup in 2004 and beyond as wireline recovers, with packet-voice applications becoming significant, and as wireless resumes its march to total pervasiveness. Despite this near-term market setback, DSP remains the technology driver for the recovering semiconductor industry, since without DSP there is no access to the Internet, no multimedia, and no wireless communications, says Strauss.