Survey Rates Chip Suppliers

Light Reading's market research division, Heavy Reading, today published the results of its latest market perception survey, covering a total of 117 communications chip manufacturers (see Heavy Reading Rates Comm Chip Makers).

2004 Communications Chips Market Perception Study is based on responses from a total of 449 buyers of such chips, nearly two thirds (64.4 percent) of whom are based in the U.S.

The buyers were asked to name product categories that they were familiar with, and for each of these categories they were asked to identify suppliers and then name market leaders in terms of price, performance, quality and reliability, and service and support. A total of 31 product categories are included in the survey.

Key findings of the survey include:

Buyers in different product sectors often have markedly different perceptions of the major chip suppliers. Among buyers of Ethernet access chips, Broadcom Corp. (Nasdaq: BRCM) is clearly perceived as the industry leader, while suppliers such as Agere Systems Inc. (NYSE: AGR.A), PMC-Sierra Inc. (Nasdaq: PMCS), and Vitesse Semiconductor Corp. (Nasdaq: VTSS) are viewed largely as Ethernet also-rans. But those roles are reversed in the view of Sonet/SDH transport chip buyers, who view Agere, PMC-Sierra, and Vitesse as industry leaders and Broadcom as a minor player.

Almost all major chip vendors have key sources of strength in specific product categories -- and almost all have glaring weaknesses. Agere was rated among the top three vendors in nine of the 19 categories in which it offers products covered by the survey. It also was ranked fifth or lower in five other categories. IBM Corp. (NYSE: IBM) earned the highest market perception scores in the packet switch fabric category (even though IBM no longer owns that line of business - see AMCC Switches On IBM's Fabric); buyers of backplane transceivers rated IBM 14th in a field of 21 suppliers.

Results suggest that many buyers of commodity-class components don't look beyond their current suppliers to evaluate products from other vendors. In the Ethernet MAC and laser driver chips categories, respondents on average identified fewer than four suppliers, and in each case only two vendors were named by more than 50 percent of those respondents. In many product categories, 20 percent or more of prospective buyers did not name market leaders for price, product performance, product quality and reliability, or service and support. Such results indicate that many buyers are content to stay with their current suppliers -- or at least are not motivated to find better products or deals elsewhere.

Intel has achieved moderate success in establishing itself as a leading communications chips supplier in the eyes of prospective buyers. Chip buyers ranked Intel Corp. (Nasdaq: INTC) among the top three suppliers in eight of 16 categories in which the vendor offers components. Intel is widely perceived as the leading supplier of network processors, and it shared top honors with Ethernet chip powerhouse Broadcom in the Ethernet controller segment. Overall, the Intel brand was fairly well recognized by buyers (although its average recognition rating of 52.9 percent is low for a company of Intel's stature). But there are some glaring weaknesses in Intel's perception ratings in the Sonet/SDH transport, VOIP, and commodity analog chip sectors.

Startups still have an opportunity to influence some of the developing communications chip segments. Startup suppliers of PON chips, dispersion compensation chips, traffic manager chips, search engines, content processors, security processors, and circuit emulation chips have a significant opportunity to capture market mindshare, and some are on the way to doing just that. Those with the most promising prospects include Azanda Network Devices, Big Bear Networks, BroadLight Inc., EZchip Technologies, NetLogic Microsystems Inc., Velio Communications Inc., Wintegra Inc., and ZettaCom Inc.

In commodity markets, suppliers that are perceived as price leaders also are perceived as providing high-performance components. In the laser driver, modulator driver, and amplifier chips categories, Maxim Integrated Products Inc. (Nasdaq: MXIM) is perceived by buyers as the clear leader in price, but Maxim also earned respectable scores for product performance in those categories. Vitesse showed similar results in the crosspoint switch fabrics segment. These results indicate that buyers believe that these vendors are delivering quality products at low prices.

The report covers the following product categories:

• Telephony (PDH) Chips
• DSL Chips
• PON Chips
• Ethernet PHY Chips
• Ethernet MAC Chips
• Ethernet Controller Chips
• Ethernet Switch Chips
• VOIP Chips
• Communications Processors
• Laser Driver Chips
• Modulator Driver Chips
• Pre- and Post-Amplifier Chips
• Crosspoint Switch Fabrics
• Sonet/SDH Data Transceivers
• Dispersion Compensation Chips
• Framer/Mapper Chips
• Digital Wrapper/FEC Devices
• Backplane Transceiver Chips
• Circuit Switch Fabrics
• Network Processors
• Search Engines
• Content Processors
• Security Processors
• Packet Switch Fabrics
• ATM SAR Chips
• ATM Interworking Chips
• ATM Switch Fabrics
• Circuit Emulation Chips
• Control-Plane Processors
• Field-Programmable Gate Arrays

Heavy Reading's 99-page report costs $3,750. For more details click on this link.

— Peter Heywood, Founding Editor, Light Reading