The alliance will likely have an effect on the landscape of the growing DSP market, which is one of the more lucrative segments of the semiconductor market. DSPs are used in everything from pagers and cell phones to handheld computers, modems, and cable and communications equipment. DSPs essentially manage how analog data, such as sound or color, become eventually presented on a digital device like a PC. They can range in price from a few dollars to $300.
Texas Instruments currently leads the DSP market and enjoys substantial support from the network of DSP software developers. TI, in fact, retooled its company strategy years ago to pursue the DSP opportunity.
Analog, however, enjoys a significant presence in the marketplace. Intel, meanwhile, has yet to participate in the market. By combining together, Analog and Intel will try to leverage the expertise of one company with the development and manufacturing heft of the other.
Under the deal, Analog will establish a joint engineering team in Austin, Texas, for developing a DSP core, which will likely come out in 2000. While the two companies will develop DSP technology together, they will conduct sales efforts separately.
"With the rapid convergence of digital communications and computing, Intel decided to invest in a dedicated DSP core that complements our existing embedded solutions," said Ron Smith, corporate vice president and general manager of Intel's Computing Enhancement Group, in a prepared statement. "We sought a collaborator to expedite achieving this goal, and with their expertise and experience in DSP technology, Analog Devices fits the bill."
"Intel is widely recognized as being the world's leader in microprocessor technology," said Jerald Fishman, president and CEO, Analog Devices. "We believe that combining Intel's experience in attracting developers with Analog Devices' record of delivering industry-leading DSP technology will deliver the platform of choice in the DSP market. This development will influence the course of embedded computer, communications and computing devices for the next millennium."
Speaking at a conference earlier in the day, Fishman said that the DSP market was growing rapidly.
"Revenues of 6 to 8 billion dollars [industrywide] in DSPs per annum across the industry is possible in the early 2000s," he said. "DSPs are growing rapidly. Revenues are now at $3 billion."
"DSPs have very attractive margins," said Tom Thornhill, a semiconductor analyst at NationsBanc Montgomery Securities. The chips can cost up to $200 or $300 per chip, close to the price range of CPUs.
While the Intel-Analog alliance presents a competitive challenge, Greg Delagi, manager of TI's DSP business, said that TI enjoys a competitive lead. To succeed with DSPs, chipmakers need not only manufacturers who will buy it, but also significant support from the software community. For example, software support for TI's 6000 DSP began in 1992, and the chip itself didn't arrive until 1996, Delagi said.
"This is a very long lead-time business. It is going to take a long time for their dream to become a reality."
TI is growing faster than its competitors, he said, gaining 5 percent market share last year in a DSP market that's growing at 20 percent a year. TI gets 29 percent of its revenue from DSPs.