Intel: Comm Chips Commoditizing
"Building chips is our business," says Mentzer, who spoke at a luncheon organized by the Technology Business Council on Friday. Rather than differentiating from one another by having specially designed chips, Mentzer says equipment vendors "will have to give service providers something they can bill for and make money on."
Mentzer's remarks come at a time when telecom equipment vendors often design their own custom ASICs (application-specific integrated circuits) to consolidate a variety of different data processing functions on a single chip. To him, this harkens back to when PC makers used to differentiate their products on the number of clock cycles, the time that elapses between operations in a computer's main memory. "Eventually, you saw an entire industry learn to stand on the shoulders of the semiconductor business," Mentzer says.
What may intensify that change is Intel's new chip-making process that makes use of 300-millimeter wafers. On these new wafers, Intel can print about two-and-a-half times as many chips as it can on the standard 200mm wafers used today. Intel's new manufacturing process also uses 90-nanometer (0.09 micron) design rules instead of today's 130nm (0.13 micron) rules, Mentzer says.
This new manufacturing technology is important because it means Intel will soon be able to build all flavors of communications chips. The micron process refers to the size of the lines that are etched onto a chip. A fabrication plant with a 0.09-micron process can create chips that are smaller, faster, and consume less than chips made by a plant with a 0.13-micron process. Mentzer also says Intel will be able to make digital and analog chips, which have different voltage requirements, using the same process.
Intel's manufacturing advance theoretically will cut down on the number of plants needed to produce communications chips. This will bring down chip prices even while the functional speed of communication chips continues to increase.
Of course, Intel will have its work cut out for it here. In the past, the networking and telecommunications chip space has been dominated by Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC), Cypress Semiconductor Corp. (NYSE: CY), PMC-Sierra Inc. (Nasdaq: PMCS), and others.
Also, Intel's not alone on the road to 0.09-micron designs. Infineon Technologies AG (NYSE/Frankfurt: IFX), for example, expects to be working with 0.09-micron designs in the first half of 2003. "In terms of functionality, there is still a massive amount of things you can do at 0.13-micron," says Jack Basi, VP of marketing for Infineon's Catamaran unit.
The commoditization of telecom equipment components will begin at the network's edge and work its way to the metro core, Mentzer says, and it won't happen all at once, but over many years. "It's time for the Moore's Law revolution to happen in telecom. The telecom business hasn't been known for bringing out new capabilities at lower price points -- or eating their young."
Of course, there are hundreds of variables as to when and where this commoditization might happen. In well understood technology areas, such as the enterprise LAN, the equipment interfaces are standard and the technology could be commoditized more quickly, says Infineon's Basi. That's not the case in other areas, such as carrying Ethernet into the metro network, he says.
What's also up for debate is whether equipment companies such as Cisco Systems Inc. (Nasdaq: CSCO) will embrace Intel's off-the-shelf idea, especially given that two of the last six companies it bought were chip or chip components companies, as are many of the companies it has funded in the past two years.
Mentzer's remarks Friday were couched in a larger discussion about where the communications business is heading in the next decade or so. His vision of the networked home includes Internet access via optical fiber and a plethora of devices that use silicon and optics to process the torrent of bandwidth coming in (see Intel CTO: The Future Is Here!). "We'd better have optics on every single desktop if we're to keep our microprocessors fed."
Unlike most technology speakers these days, Mentzer spared his audience a recap of the telecom boom years or a textbook review of the market's crash: "I can only tell you two things about recessions: They end, and you can't save your way out of them. You need to invest in new technology."
— Phil Harvey, Senior Editor, Light Reading
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