Texas Instruments banks on demand for DSP chips

Texas Instruments, the leading maker of digital signal processors, is aggressively marketing the chip for a range of gear from cable modems to Internet audio players and digital cameras.

"The bottom line is wireless is a big market for DSP, but it's roughly about 40 percent of the (total) market," said Mike Hames, the TI vice president who heads the DSP business.

Digital signal processors are chips that refine digital audio and video data so they can be efficiently sent across computerized networks. An analog converter actually translates real-world sounds and images into ones and zeroes while the DSP removes noise and creates a more compact file. DSPs were first used by TI in 1982 in its "Speak and Spell" game and a talking doll named Julie, but sales really took off with the boom in cellular phones.

Last year, the programmable DSP market generated $4.4 billion in sales, up 25 percent over 1998, according to Tempe, Ariz.-based Forward Concepts. TI claimed 48 percent of that market, a share that has grown in recent years. For 2000, the total is expected to grow to $6.1 billion, with 2004 sales projected at $19.2 billion, a figure comparable to current sales of PC processors.

TI's stock, meanwhile, has gone from the $14 range, split-adjusted, two years ago to above $70 today.

TI is not the only company with its eye on the programmable DSP market. In addition to big names such as Motorola, Lucent Technologies and Analog Devices, the DSP market has been one of the hottest areas for new chip start-ups, Strauss said. Other chipmakers sell digital signal processors with a fixed function, such as leading analog modem chipmaker Conexant Systems.

TI, however, has been singularly aggressive in trying to find and kick-start new markets for the DSP.

Much of the growth forecast for the DSP market will come from continued growth in wireless, with handset sales expected to top 900 million handsets a year by 2003. However, Forward Concepts president Will Strauss said, "There are many other things that are coming on that will be as big some day."

In particular, Strauss points to the role of DSPs in the packet-switched networks that will replace the circuit-switched telephone network over the next 20 years.

"About 10 years out, it will begin rivaling the wireless market for DSP," Strauss said.

TI has invested heavily in that area, purchasing cable modem chip firm Libit Signal Processing along with Internet telephony firm Telogy Networks. Hames said the company sees a big future for DSPs in enabling voice traffic over data networks.

In recent years, TI has grown convinced the digital signal processor is its future, selling its memory chip unit to Micron Technology and focusing on DSPs and the analog chips that accompany them.

TI has focused on growing its lead in the wireless market while casting a wide net to find new places to market its chips.

"Nobody knows who's going to be the next Nokia or what's going to be the next cell phone," Hames said.

TI has used several tactics to find emerging markets for its processors. For years, there has been a mass market for the chips, with companies using the programmable nature of the chips to adapt them for a wide range of uses.

TI's sales force looks at the 40,000 or so mass-market customers to find interesting uses and to spot trends. If the market is big enough, the company launches its own in-house unit to support the application. The company also has its internal new business group as well as a team that works with third parties to develop new applications for TI chips.

It was the third-party unit that discovered Telogy, a Germantown, Md.,-based firm that had quietly become the leader in using DSPs to send voice over the Internet.

"We realized they had captured close to 80 percent of the market share in that area," said Trudy Stetzler, a senior member of TI's technical staff who works with TI's new businesses.

Sometimes the ideas come from within TI.

A group of engineers in one of TI's research labs was working with networked cameras and came up with the idea to use DSPs to improve the quality of security cameras. Last week, Panasonic announced it was using TI's chips in conjunction with a hard drive to create a next-generation surveillance system

And when the daughter of TI senior vice president John Scarisbrick brought home an early MP3 player from college, the company saw another possible market for DSPs. The company now claims 30 design wins in the area, including Sony's Music Clip and RCA's Lyra.

Not all the uses prove to be that promising. For example Stetzler recalled that a Japanese customer wanted to use DSPs as the heart of a "love meter" that would store its user's likes and dislikes and search out potential matches.

TI is also tapping the universities for the next generation of uses for DSPs. The company has a program that funds DSP-centered research in virtually any area that shows promise.

Some of those applications, like the Xybernaut wearable computer, are moving beyond the laboratory into the commercial market. Today, much of the research is focusing on the potential of DSPs in medical products, a market that TI sees as a key for 2010 and beyond.

Stetzler said TI is already involved in digital hearing aids and cochlear implants. As the performance of DSPs increase and power consumption of the chips continues to decline, Stetzler said she envisions the uses growing to, say, a heart monitor that could call for help if it detects a heart attack.