Search Engine Chips Heat Up

Chip vendor Cypress gained market share against leader IDT, largely through help from you-know-who

May 4, 2004

3 Min Read
Search Engine Chips Heat Up

The niche market for search engine chips is quietly blossoming, although there's still the problem of one customer hogging most of the market.

Figures being released this month from The Linley Group show search engine chips grew to a $95 million market last year, up from $83 million in 2002.

The big mover last year was Cypress Semiconductor Corp. (NYSE: CY), whose market share jumped to 31 percent. That's still second place to the 45 percent share of market leader Integrated Device Technology Inc. (IDT) (Nasdaq: IDTI). But Cypress doubled its presence, as noted in an earlier market survey from ISuppli Corp. (see Cypress Kicks NSE Butt).

The reason? "There's one large customer, and they want to maintain a pretty balanced distribution of business among their suppliers," says Linley Group analyst Jag Bolaria. "Because of that, market shares can change pretty easily."

The customer -- as if you couldn't guess -- is Cisco Systems Inc. (Nasdaq: CSCO), which Bolaria says takes up 80 percent of the market for ternary content addressable memory (TCAM) chips, the main ingredient of a search engine. The chips are used for storing large IP routing tables, with higher-end routers needing more table space and hence more TCAMs.

Third place, a 14 percent share, went to NetLogic Microsystems Inc., which recently filed for an IPO (see NetLogic Files for IPO). Startup SiberCore Technologies maintained a 5 percent market share. "SiberCore stayed flat in a market that grew, which is kind of scary for them," Bolaria says. "They're going to need some sort of a big customer win."

IDT and Cypress seem set in their leadership roles, but the market could get stirred up by some alternative technologies. Companies are working on using plain, cheap memory chips for storing tables, using creative algorithms to match the performance of a TCAM (see Search Engines Face Software Challenge). Most TCAM vendors have pooh-poohed the idea, but Bolaria thinks the market will eventually crave a TCAM substitute.

"As your tables get bigger, TCAMs will be expensive and power hungry, so I think there's a need for an algorithmic solution to complement TCAM," Bolaria says.

In fact, many of the non-Cisco equipment vendors have been pursuing their own algorithmic methods, which explains why Cisco makes up so much of the TCAM market. Building these algorithms isn't easy, usually requiring PhD researchers, so companies might be willing to switch "if a merchant vendor provides the same kind of performance," Bolaria says.

Cypress is the only large vendor to announce algorithmic search engines, with its Sahasra line (see Cypress Wants a Piece of Search Pie). NetLogic and IDT are considering whether to follow suit, Bolaria says.

Startups such as BestRoute Inc. and HyWire are also developing algorithmic search engines, but they have to battle the OEMs' usual skittishness. It takes engineering resources to switch vendors, and an OEM won't want to do that for a startup that might not be around in a few years, says Betsy Van Hees, an analyst with ISuppli. "There are a lot of great ideas out there, but the companies that are strong in that market, like the IDTs and Cypresses, are the ones that are going to be there in the long haul," she says.

Bolaria is forecasting a $250 million market search engine market by 2007, representing growth of about 20 percent per year.

— Jag Matsumoto, Senior Editor, Light Reading

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