That's the premise behind "Comm Chips Reboot," the latest report from the Optical Oracle, Light Reading's monthly subscription research service. Despite ongoing weak demand in the telecom sector, the report states, there is renewed interest in certain types of communications chips. A new market is shaping up, and some old ideas (and their vendor proponents) are being left in the dust, as startups and invigorated older companies take their place.
Central to this new market are off-the-shelf chips that compete with internally developed ones. In contrast with traditional application-specific integrated circuits (ASICs), these chips, dubbed application-specific standard products (ASSPs), aren't designed in-house from scratch but instead are cobbled together from off-the-shelf components. These components are supplied by semiconductor vendors, but still designed for particular applications.
The trend toward these off-the-shelf ASSPs is accelerating, thanks to growing demand for them from network equipment makers, who can save costs by not having to develop their own silicon. As a result, over 60 percent of framer chips are now ASSPs.
There are three areas where off-the-shelf ASSPs are especially hot. The report provides competitive analysis of all leading products in each of the following categories, comparing key features and functions in detailed charts:
- Next-generation Sonet/SDH chips: The report says growth is on the horizon for chips that incorporate new technologies that make the most of existing network capacity. These include generic framing procedure (GFP), which allows any protocol to be mapped onto Sonet or SDH, as well as techniques for virtual concatenation and bandwidth on demand.
- Network processors: A new generation of faster, 10-Gbit/s chips geared to routers and application-aware switches is emerging. Network processors are a key trend because they can perform a wide range of different applications, depending on how they're programmed. This segment is particularly fertile for startups.
- Switch fabrics: These chips include TDM (time division multiplexed) fabrics that groom Sonet channels into groups, as well as intelligent fabrics that read packet headers in order to determine which port to send the packet to.
Not everyone's going with the flow as outlined above. Indeed, the emerging comm chip trends are likely to accelerate a shakeout, as some vendors are left behind, unable to achieve the financial fitness to partake in the new market.
The report groups the following 12 public companies according to the strength of their financials and their product potential:
- Agere Systems (NYSE: AGR)
- Altera Corp. (Nasdaq: ALTR)
- Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC)
- Broadcom Corp. (Nasdaq: BRCM)
- Conexant Systems Inc. (Nasdaq: CNXT)
- Cypress Semiconductor Corp. (NYSE: CY)
- Infineon Technologies AG (NYSE/Frankfurt: IFX)
- Intel Corp. (Nasdaq: INTC)
- PMC-Sierra Inc. (Nasdaq: PMCS)
- TranSwitch Corp. (Nasdaq: TXCC)
- Vitesse Semiconductor Corp. (Nasdaq: VTSS)
- Xilinx Inc. (Nasdaq: XLNX)
Infineon and Intel haven't exactly wowed Wall Street, but both are large, diversified manufacturers with significant resources. As such, they are in a position to acquire distressed assets at dimes on the dollar, the report states.
The report also highlights a range of startups in the comm chip space, which may find the playing field widening as older companies fade out. Included in the competitive analyses are Bay Microsystems Inc., Cognigine Corp., EZchip Technologies, Fast-Chip Inc., Galazar Networks Inc., Internet Machines Corp., Mindspeed Technologies, Sandburst Corp., SandCraft Inc., Silicon Access Networks Inc., Velio Communications Inc., West Bay Semiconductor Inc., and Xelerated AB.
— Mary Jander, Senior Editor, Light Reading
Editor's Note: Light Reading is not affiliated with Oracle Corporation.