Summary:

It was only a few years ago that we would eagerly await data from firms like IDC and Gartner Dataquest about the overall PC sales. We did so, because we would want a window into the future demand for chips. The memory chip demand, the processor […]

It was only a few years ago that we would eagerly await data from firms like IDC and Gartner Dataquest about the overall PC sales. We did so, because we would want a window into the future demand for chips. The memory chip demand, the processor forecasts and even networking silicon had its fortunes tied to the PC. It was the growth engine of Silicon Valley. No more – today’s growth engine is cell phone and nothing but the cell phone. (Read my article from May 2003, The Next Big Thing)

EE Times tells us that cell phones are “the single largest market for processor silicon with 2003 shipments north of 450 million units.” Will Strauss, of Forward Concepts and a long time chip industry observer has some interesting insights, and I am in agreement.

Everyone is well-acquainted with the fact that the DSP baseband is the heart of every cell phone. But cell phones are also the largest market for RISC cores. Usually on the same die as the DSP, RISC cores handle the human interfaces of keypad and screen as well as protocols, number storage, PDA and increasing DSP functionality. So-called application processors are being added for multimedia functions like JPEG codecs for still cameras, MPEG-4 codecs for video and MP3/WMA audio.

The Semiconductor Industry Association said strong sales of cell phones led to a nearly 37 percent increase in worldwide chip revenue in April to $16.9 billion, according to Sfgate.com. I think it is only going to get bigger. In June 2004, Intel upped its second quarter revenue estimates because of better than expected flash memory sales. Ditto for AMD. Anyone looking for further proof on the importance of cellphones to the chip, and hence the technology business should consider recent rumors: Texas Instruments is planning to open a new plant in Richardson, Texas, sooner than expected. TI, by the way is the king of cellphone business.

Unfortunately, this does not bode too well for Silicon Valley. Barring a few companies like Texas Instruments and Qualcomm, the US presence in the wireless business is pretty slim. I think we are in an era of technology where users define the business. If the driver is going to be wireless then the cutting edge users are in Asia – in China, Japan, South Korea and India. They are becoming the early adopters, just like we were early adopters of the PC technologies. I think this is a brutal and harsh reality. Your thoughts, will be appreciated.

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