Inflection Research

May 31, 2008

Next Gen Semi Design (part 8) – Risks

Filed under: Platforms,Semiconductors,Technology — Tags: , , , , , , , — semanticzen @ 6:33 pm

In the last post I reviewed the risks to Altera and Xilinx due to competition from other platforms. In this post I’ll review the risks from existing competitors and new entrants.

PLD Market: Existing Competitors Gain Momentum

Actel with 6% market share has a strong niche in anti-fuse FPGAs (one time programmable) and in flash based FPGAs. Flash based FPGAs is a segment Xilinx and Altera have stayed away from, but February 2007 Xilinx’s introduced a flash-based Spartan-3AN and was named to EDN’s Hot 100 Products of 2007.

There have been many new entrants with Flash based FPGAs in recent years as venture capitalists and entrepreneurs may feel more compelled to compete in a corner of the market not dominated by one of the two industry leaders. Flash-based FPGAs have entering several new markets end markets and they may actually grow faster than the more traditional SRAM-based FPGAs.

Actel began shipping a Flash based FPGA in 1999 and they appear to currently have a strong leadership position in this good niche area of the FPGA market. Actel has a deal with ARM for putting soft versions of ARM7 processors in Actel’s non-volatile flash-based FPGAs. Altera recently began offering FPGAs that also support ARM processors.

Flash benefits from being non-volatile (e.g. it doesn’t need power to maintain the chip’s data), but SRAM devices will always be faster. Unlike SRAM based FPGAs, Flash based FPGAs do not have to be booted by an external device to load the software so they are more of a true single chip solution comparable to ASICs (related to power requirements and the number of components in circuit board design).

Lattice Semiconductor with 7% market share has made acquisition to attempt to increase its share in the PLD market. Having these diverse PLD software development platforms for its various acquisitions has been a disadvantage. In 2001, Lattice’s division Vantis and Agere (at the time Lucent) gave it a 25% market share in the PLD market. Lattice is strongest in the slower growing CPLD segment where it is number three in market share after being over taken by Xilinx in 2007 for the number two position. Altera is number one in CPLD market share.

QuickLogic with 1% market share targets specific applications (similar to ASSP’s) and is strong in power sensitive markets.

PLD Market: New Entrants

Newer companies such as ChaoLogix, Stretch, and Cswitch are entering the programmable logic space and trying to create a disruptive, game changing technology.

A big problem for start-ups and other semiconductor companies entering the programmable logic market is place and route tooling software, where Xilinx and Altera’s design platforms are dominant. Roelandts the CEO of Xilinx has stated that “there is no 3rd party place and route software; place and route software at Xilinx runs to 20 million lines of code.” A new company also runs into the problem that initially no one knows its development platform and the lack of IP available for the startups chips.

A larger better funded player like Intel, IBM, or Texas Instruments enters the market. With the Geneseo project Intel and IBM opened sourced what could have been a competitive advantage for them (discussed in a couple pages). A risk could be a strong player like Texas Instruments, with its current powerful position in analog and DSP, purchasing Actel to get a foothold in the PLD market.

May 26, 2008

Next Gen Semi Design (part 7) – Risks

Filed under: Platforms,Semiconductors,Technology — Tags: , , , , , , , , , — semanticzen @ 6:20 pm

In the next four blog posts on the next generation of semiconductor design I will go over the potential risks to Xilinx and Altera’s platform. In this post I’ll review the risks stemming from potential competition from other platforms.

Who has the best platform for the next generation of semiconductor devices: Intel, TI, IBM, Xilinx, Altera, ARM Holdings, Analog Devices, Microchip Technology, etc? What platform will large companies and entrepreneurs use to build the next generation of products?

One-time programmable processors are one source of competition for embedded system solutions; with Microchip Technology’s programmable microcontrollers and TI’s DSP platform.

Many entrepreneurs love Microchip Technology’s one time programmable processors and their straightforward API. Microchip has roughly a 50% market share for 8-bit processors and over 90 of its microcontrollers ship with some analog component. It also ships a microcontroller with flash memory. It has built a good developer community with over 3,000 embedded designers attending its’ thirteen separate 2007 conferences held in four different languages in seven countries.

It released a 16-bit product in 2003 and a 32-bit product in December of 2007; which both use the same development tools as it’s widely used 8-bit version. Microchip is the only microcontroller vendor supporting 8-bit, 16-bit, and 32-bit products on one development environment. Its 32-bit microcontroller, the PIC32 Family, uses the MIPS the MIPS architecture and was on EDN Magazine’s prestigious list of “Hot 100 Products of 2007″.

Microchips generic processors will never come close to the performance of PLDs, but it should continue to see success in products with lower performance requirements.

ARM Holding’s processors are the dominant processor for mobile phones and the most widely-used 32-bit microprocessor family with over 75% of all 32-bit embedded CPUs. Arm processors are soft core IP designs that can be embedded in ASICs or FPGAs and are really complimentary to hardware provider’s offerings.

Intel’s x86 processor has a large community, but an inherently slow architecture that has not seen very much success outside of the mainstream PC and server marketplace. Intel is creating a multi-purpose “programmable Intel architecture machine” called Larrabee for high-performance computing and discrete graphics. Larrabee will be Intel’s first “many-core” product” and is expected to be available in 2010. It is debatable how competitive this device will be with the devices in the market two years from now. In the meantime, how much embedded systems market share can the PLD vendors capture?

Texas Instruments‘ is the leading DSP platform with over 50% market share and is also a leading player in the high performance analog chip market. TI risks losing market share from several diverse competitors nipping at its heals such as platform PLDs targeted at DSPs and mixed signal devices, lower end device providers from China such as Vimicro incorporating custom and 3rd party IP, end market specific mixed signal competitors such as Sigma Design’s DSP, and finally seeing competition for its single chip mobile phone solution (integrated application processor, baseband, and support pieces).

Analog Devices nascent and somewhat beleaguered DSP processor platform Blackfin has some strong advocates and Microsoft’s .Net Micro Framework, which is targeted at embedded systems, was recently ported to Blackfin; increasing the toolset available for devices built around Blackfin

A 3rd party EDA tools vendor may develop a strong integrated meta-platform that can act as a neutral party and potentially support building devices on top of several different vendor’s platforms. Granted this sounds more like a pipe dream.

While Altera and Xilinx have great platforms with strong communities there are concerns that that the business model for intellectual property (IP) is poorly positioned. A considerable amount of IP is given away by the FPGA vendors which undercuts some potential IP vendor’s offerings. The FPGA vendors will have to regulate themselves to providing the framework IP allowing 3rd party IP companies to provide important add on intellectual property.

As with any company developing a platform there are conflicts of interest that must be adroitly managed. Battles for platform supremacy often have winner take all outcomes with all other competitors left as niche players. The next decade will see further consolidation around very few design platforms.

May 23, 2008

Next Gen Semi Design (part 6) – Development Platforms

Filed under: Platforms,Semiconductors,Technology — Tags: , , , , , — semanticzen @ 4:09 am

Xilinx and Altera have solid software design platforms that customers use to program their chips. The dynamics of the PLD industry give the top players competitive advantages due to the platform they each have created. Each platform has built a strong moat based on the number of integrated circuit design engineers that understand it (and whose careers are based on this knowledge) and the amount of intellectual property available.

Thousands and thousands of engineers make their living because of the knowledge and expertise they have of the development platforms they use. Switching costs are high for engineers to learn new design frameworks. In addition, thousands more engineers learn Xilinx and Altera’s development tools every year in colleges in the USA, India, China, and the rest of the world.

Most PLD’s are built using Xilinx or Altera’s development platform where they can also use thousands of IP cores (re-usable intellectual property) built by Xilinx or Altera (depending on whose platform you are using) and offered for free (or nearly free). Their platforms also support 3rd part IP cores.

Each company plus dozens of third party companies build re-usable components (IP cores) that increase engineers’ efficiency. For ASICs, the largest impediment to IP reuse is verification, which can consume 70% of the development cycle. With FPGAs reuse is easier as the FPGA vendors pre-verify 3rd party vendors IP.

The success of a design platform largely depends on the quality of the IP building blocks. A huge advantage that the PLD firms have over the EDA firms is a much easier migrating path from one manufacturing process to the next. This allows IP cores to be easily rolled into the next generation architecture.

The ASIC market has struggled to embed and verify 3rd party IP. With Xilinx and Altera offering end-to-end design capabilities from design tools to IP cores, including free IP cores and a marketplace for 3rd party IP cores, they are creating an ecosystem where the customer’s have one neck to choke when problems arise. Creating an environment similar to IT departments’ migration to a single primary provider (Microsoft, Oracle, IBM, or SAP) so they can have a primary partner to lean on when issues arise.

PLD’s allow IP cores to be embedded at the software level, not in the hardware. This simplifies the process so IP can be tested and verified by the supplier on a finite number of chips since FPGA’s are a common single chip manufactured in volume by the fab; as opposed to ASIC’s whose physical design is dictated by the IP cores themselves.

A behavioral change is needed to design embedded systems and programmable chips offer a different development paradigm. The Internet and web programming could never have moved as fast as it had if websites had to be bug-free when first released, a requirement for ASICs.

Having IP that is available, certified, and supported is a necessity. Programmers on the Java EE and .Net platforms are offered thousands of tested and supported libraries. This is a basic requirement of any enterprise development platform. IP sub-systems (objects) must offer easily understandable interfaces (API’s) that allow the designer to focus only on integration and their designs differentiating factor.

A serious question mark is how can EDA vendors build an evolvable design platform incorporating IP cores that can subsist across multiple ASIC generations. FPGA’s allow the platform to be based on single chip architecture, similar to how the x86 platform enabled the emergence of the PC.

Every year more IP cores are built and more engineers learn these two companies’ platforms. It would be hard for new entrants to overcome the platform network effects that have been built by Xilinx or Altera. It would be nearly impossible for a startup PLD company to compete with this breadth of knowledge. The ability of Xilinx and Altera to build developer ecosystems may eventually trump all but the highest end digital and mixed signal chips.

May 20, 2008

Next Gen Semi Design (part 5) – Xilinx & Altera

Filed under: Platforms,Semiconductors,Technology — Tags: , , , — semanticzen @ 2:23 am

Xilinx has a customer base more diverse across industries and while Xilinx’s competing chips often offer better performance Altera has won several recent design wins because of its focus on lower power (and correspondingly better battery life). Both use a fabless model which keeps capex requirements low and taxes low, due to products being manufactured overseas. Both companies have high margins, no debt, and around $1B in cash.

 

Company

Symbol

Mkt Cap

Net Cash

2008 P/E

2007 P/CF

ROE

Net Margin

Yield

Growth

Xilinx

XLNX

$7B

$1B

15

14

21

20

2%

15%

Altera

ALTR

$6B

$1B

16

25

24

23

1%

15%

 

The leading PLD vendors will stay at the cutting edge of manufacturing processes. When a fab begins a new, smaller fabrication process they like to use PLD’s as one of the first chips they manufacture because they are high volume with relatively straight forward manufacturing designs. Setting up the fabrication process for microprocessors and ASICs are much more difficult, and getting more and more difficult with each new smaller geometry. The latest FPGA products are at least one or two generations ahead of any ASIC products. It is a safe bet that Xilinx and Intel will both remain at the cutting edge in manufacturing processes.

Xilinx Overview

Founded in 1984 and public since 1990, at $.83 a share when adjusted for splits. Every year for the past decade Xilinx has generated positive free cash flow, including in 2001 and 2002. It has a global customer base of over 21,000 customers (top 15 customers account for 33% of sales). It sources semiconductor wafers form multiple suppliers.

Xilinx has a little over 50% share of the PLD market. It is the 3rd largest company in the overall logic market. In 2007, a survey of semiconductor customers ranked Xilinx, for the first time, as the most important vendor, ahead of IBM or Intel. Over the past decade it has slowly been moving up the list on this survey.

Xilinx’s Virtex FPGA’s can include up to two embedded IBM PowerPC cores, offering embedded system designers the ability to build a system-on-a-chip capable of running an embedded OS like Linux. It has been making solid progress in the high performance DSP market as well as the embedded processor market. It offers an embedded development kit based on the Eclipse framework.

Xilinx currently trades at an opportunistic valuation with a 2008 P/E of less than 15. It has a ROE and net margin around 20. Including investments and subtracting a billion dollar convertible the company has a net cash position of one billion. This cash position has been shrinking as the company buys back shares. I have modeled revenue growth of 12% and earnings growth of 15% (due to share buybacks and margin improvements) over the next five years. Altera’s valuation is very similar.

Altera Overview

Altera was founded in 1983 and has been public since 1989. It has a global customer base of over 14,000 electronics equipment makers. It uses a single source, Taiwan Semiconductor, for its semiconductor wafers; subjecting the company to any potential production issues incurred by Taiwan Semiconductor.

May 18, 2008

Interviewing Programmers (part 2)

Filed under: Architecture,Programming,Web Platform — Tags: , , , , , , , , , , — semanticzen @ 10:25 pm

In the last post I outlined our criteria for evaluating programmers and architects, and how surprisingly difficult it is to find good candidates. Since the telecom and .com bubble burst in 2000 it appears many top notch people are choosing non-IT career paths. Below I outline the base set of questions that we ask in an interview. We cater interviews individually for each candidate so we can best understand their ability. While we are trying to fill a specific position we have a large enough IT staff to modify positions around candidate’s talents.

Also, if you ask the same question over and over again recruiters pick up on that and prepare candidates for specific questions. So we only use the below list as a reference point. Most of the questions we ask are not on the list below, but they may be related. When listening to the candidate it is not good to be thinking of the next question. We alleviate this by having two architects in every face-to-face interview which is based more on problem solving / case study style questions than do you know / can you explain style questions. In the one-on-one phone screens we do this list is helpful as a reference point to sharpen our focus on listening.

As a company focused on building web applications using Microsoft’s .Net / SQL Server platform are questions of course are focused on those domain areas.

Why be an Architect or Programmer?

  1. Do you understand what the position is that you are interviewing for? Or what type of position are you looking for?
  2. What about this position do you find most appealing and what if anything concerns you?
  3. Right now what would be your ideal job?
  4. What are your strengths and weaknesses?

Communication

  1. When a co-worker is wrong about a work issue, what is the best way to discuss the issue with him or her?
  2. Describe a decision you made that was unpopular and how you handled implementing it?
  3. Tell me about a situation where you worked effectively under pressure?
  4. What makes someone a good programmer?

Technical Questions

  • We often ask the candidate what technology the feel most comfortable with and start with that technology or ask them to walk through a brief overview of their recent experience and begin with a technology the indicated they have used extensively
  • If the interviewee gets stuck on a question we often ask them how they would go about figuring this out (what steps would you take?).

All Programmers

  1. Describe the difference between a thread and a process? Process vs AppDomain?
  2. What is a Windows Service and how does its lifecycle differ from a “standard” EXE?
  3. How many processes can listen on a single TCP/IP port and why?

Component Development

COM

  1. What is the purpose of COM? Why was it needed and what problems did it solve?
  2. Describe the .Net architecture?
  3. What does regasm do? Difference between regsvr32?
  4. What is DCOM? How do you create a DCOM object in VB6? How do you create a DCOM object in .Net?
  5. Explain Object Context.
  6. What are types of compatibility are available in VB6?
  7. Does VB6 support multiple inheritance? What about .Net?

.Net Framework

  1. Explain the use of virtual, sealed, override, and abstract
  2. How does the garbage collector in the .NET CLR manage object lifetime? What is the difference between Finalize() and Dispose()?
  3. How does impersonation work?
  4. What is the difference between
    1. Delegates and events?
    2. Class and structure?
    3. Protected and internal
    4. Shadowing and override
    5. ArrayList and Hashtable
    6. Optimistic and pessimistic locking
  5. How do you enable and disable connection pooling?
  6. How do you implement Database Transaction Coordinator in .Net?
  7. Describe an example where you used
    1. A struct?
    2. Overloaded a constructor?
    3. Overloaded a method?

ASP.Net Development

High-level

  1. What ways can you get HTML content from a website at runtime?
  2. What happens when an ASPX page is requested from a browser? What about ASMX?
  3. How do you measure performance of an ASP.Net application?
  4. What code should be placed in the code behind? What should not?
  5. What different ways can you test an ASP.Net application?
  6. What are some of the best ways to optimize an ASP.Net application
  7. What is the MVC pattern?
  8. When should you use a web service and when should you use the GAC?
  9. Provide an example of a custom HttpHandler and a .Net implementation of an HttpHandler?
  10. Benefits and limitations of: Viewstate, Query Strings, Cookies, Hidden fields

Web Services & JavaScript

  1. In JavaScript how do you use xmlhttp posts?
  2. How do we do asynchronous processing using Ajax?
  3. What are the benefits and limitations of Ajax?
  4. How pass parameters to a web service from JavaScript?
  5. Explain what the Scriptmanager control does in Ajax?
  6. What is JSON? How does it compare to XML (advantages and disadvantages?)
  7. What is the difference between XML Web Services using ASMX and .NET Remoting using SOAP? What is the difference between ASMX and WCF?
  8. How do you expose a web service to 3rd party companies?
  9. What are the steps to consume a web service exposed over the internet by another company?
  10. How do you secure a web service?

Events

  1. What are events? Do they have return types?
  2. How do you connect multiple events to a single event handler in ASP.NET web pages?
  3. How do you determine which web server control raised an event?
  4. How do you dynamically bind event handlers at run-time in ASP.NET web pages?

SQL Server Development

  1. Explain normalization? What type of normalization is best for what type of application?
  2. What is fill factor?
  3. What are the different transaction levels?
  4. What are the different types of locks? What is lock escalation? What are some of the locking hints?
  5. How do you determine when to add or remove a non-clustered index?
  6. How do you optimize a stored procedure?
  7. When have you used a temporary table in a stored procedure?
  8. If I execute an insert statement on a table with a trigger on it and the trigger fails, what happens to my insert statement?
  9. Provide an example of when you would decide to write a user defined function in T-SQL?
  10. Describe a good time to use a WHILE loop.
  11. Describe a good level of normalization in a transactional database.
    1. We are looking for an explanation, not an answer like “3rd normal form” and clarify the question if necessary
  12. Can you describe a time when you needed to use a transaction?

Other

Here we let the candidate pick from the below choices and ask a few questions in that domain.

  1. SQL Reporting Services
  2. BizTalk
  3. SharePoint
  4. LDAP or Active Directory
  5. Windows Script Host & PowerShell

Architecture

  1. What new technology have you learned or used recently that allowed you to solve problems easier or differently?
  2. Good architecture is necessary to give programs enough structure to be able to grow large without collapsing into a puddle of confusion. What are some of the key tenets of application design?
  3. Describe {interviewer selects from choices below} architecture, when is it useful, and why? Or have the candidate critique one of these types of architecture.
    1. Event Driven
    2. Object Oriented
    3. Services Oriented
  4. What is the difference between SOA and OO?
  5. What are the most important aspects of object oriented programming?
  6. What technology are you most interested in?
    1. What are you doing with it?
    2. What problems will it help better solve
  7. What is scaffolding
  8. What is object-relational mapping
  9. What code should not be placed inside an object?
  10. What is the difference between a framework, an application, a platform, , and a service?
  11. What is UML? What are advantages of using UML?
    1. How many types of diagrams are there in UML?
    2. What is the sequence of UML diagrams in a project?
    3. Give a brief explanation of all the Elements in activity diagrams?
    4. Describe the various components in a sequence diagram?
    5. Explain the different elements of a Use Case?
  12. Why are design patterns useful? What are the three categories of design patterns?

Case Study Questions

TBD, we typically craft these shortly before the interview; often based on recent challenges we have solved

  1. It isn’t necessarily critical that they find the optimal solution, it is critical that they
    1. Show good listening skills
    2. Ask good follow-up questions
    3. Demonstrate good problem solving skills

Problem Solving

  1. Describe one of the most difficult problems you have had to solve and how you solved it?
    1. Looking back how would you handle it now?
  2. What steps do perform when learning a new technology? What was the last technology you learned (and why)?
  3. Determine if is a quick thinker –> ask a couple off the wall questions

Motivation

  1. What are you going to do over the next 6 months to make yourself a better programmer?
    1. Is their answer quantifiable / measurable?
    2. Some example answers: read good code (find how?), read books, follow blog(s), contribute to open source project, etc
  2. Give an example of a goal you reached and tell me how you achieved it?
  3. What is it that most motivates you?
  4. What accomplishment are you most proud of?
  5. Why did you leave your last job?
  6. What are you looking for at this point in your career and why?
  7. Where do you see yourself in five years?

May 17, 2008

Interviewing Programmers & Architects

Filed under: Programming,Web Platform — Tags: , , , — semanticzen @ 9:21 pm

Over the last three years I have been responsible for hiring technical people for part or all of our company. Due to turnover and new positions we are almost always hiring. I’m consistently amazed at the poor quality of candidates in the marketplace. We use technical recruiters and don’t interview most of the candidates the recruiters submit. Yet we still only make an offer to less than 10% of the candidates we interview; fortunately the vast majority of candidates accept the offer.

We build web applications to manage the operations of transportation and logistics companies. While there are challenges the solutions we build are far from rocket science. Most of these applications are simple CRUD (create, read, update, delete) apps where the general premise of the application is a search box (or initial report to drill down from) a resultant grid to view and/or update; and potentially the ability to drill down to more granular levels where the CRUD pattern is repeated.

Most of the people we hire are ASP.Net and SQL Server programmers. Most of the candidates cannot explain how to read the value from a simple text box after the page has been posted back without using view state. Many say it cannot be done; to which I usually respond “How did web apps work before .Net was created?”…at that point I typically get a lengthy silence. Stated another way I use various questions to ensure the candidate understand the request/response, stateless nature of web applications and most candidates don’t understand this paradigm.

The basics seem to be lost on most programmers (or the ones looking for jobs). Many programmers just know how to drag and drop controls onto an ASPX page in Visual Studio and how to set the properties of those controls. The problem is when issues arise, optimization is required, or unique features are requested these programmers are of little usefulness. The problem doesn’t seem isolated to web programmers as many database programmers, with years of experience, cannot explain the difference between a clustered and non-clustered index.

Most candidates show little intellectual curiosity which is especially demonstrated when we ask basic problem solving or case study questions. Now I realize my company is no Google and doesn’t get many Google quality candidates, but the knowledge and expertise candidates’ exhibit has not improved in five years. If anything it appears to have generally declined. This is surprising considering web development innovation has stabilized after rapid progress until roughly 2002 – 2003. While browsers and networks have improved the major web application technologies and architectures (such as AJAX, JSON, CSS, REST, SOA, etc) have existed for over five years. Since 2002 -2003 much of the progress appears to be on the infrastructure side, but that is another discussion.

Interviewing and finding good people is always difficult, but it in the IT world it is as difficult as it has ever been. Below I’ve outlined the criteria we use to evaluate candidates. It is evenly split between straightforward technical abilities and behavior/aptitude skills. While interviewing will always be subjective it is good to quantify the process as much as possible.

Criteria

Ability (0-5)

Comments

Interviewed By
SQL Server

  

Understands DML and query optimization, how SQL Server physically stores the data, how to perform database design and data modeling

{Interviewers Name}
Web Development

  

Primarily covers understanding of the .Net Framework and object oriented design, also include: ADO, COM+, etc

   
Component Development

  

Primarily covers understanding of the web paradigm specifically ASP.Net and web technologies like: JavaScript, sessions, cookies, HTTP, XML, web services, IIS, DHTML, etc

   
Problem Solving

  

Can apply one’s knowledge to efficiently solve problems and when needed can broaden knowledge by quickly learn needed technical and non-technical information. Given a high level problem can this person find an optimal solution?

Candidate Name
Attitude

  

Displays strong desire to learn, motivation to take the initiative to learn what is need to solve problems, demonstrates a great work ethic and good team work

{Candidate Name}
Communication

  

Is a good listener engaging in feedback and asking follow-up questions as needed. Can clearly communicate ideas to technical and non-technical people

  
Other

  

This is an optional field to add comments or add “bonus” points for a unique ability or experience that this candidate offers

Interview Type
Interview Result

0.0

  

Phone /

Face-to-Face
Suggested Project Type

{Comments about what type of project and/or team this candidate would be a good fit for}

 

We rate a candidate’s ability on a scale of 0 to 5; with 5 being the best. For junior level candidates we are looking for someone with good problem solving, attitude and communication skills and minimal technical skills. Mid-Level and senior candidates must also possess a certain level of technical skills. Our conclusion of a candidate’s experience level is based on the ratings we assign to each category.  Only a senior programmer is required to have a specified level of understanding of the three technology domains we identify. 

Our opinion is that a certain level of the softer skills (problem solving, attitude, and communication) is required at every level.  The main difference between junior-level and mid-level is technical experience.  The main difference between mid-level and senior-level is technical experience and problem solving ability.

Ultimately we look for a person with the required aptitude who has a good attitude. If someone has built a strong expertise in one area (such as ASP.Net or T-SQL) than they will be able to build expertise in the other technologies we use. I’ve discussed the problem of finding good technical people with friends in other companies and they appear to be having the same problem. I wonder how widespread an issue this is and how much it will affect IT organizations structure in the near future.

Next Gen Semi Design (part 4) – PLD Market

Filed under: Platforms,Semiconductors — Tags: , , , , , — semanticzen @ 12:50 am

The Programmable Logic Market

Programmable logic devices (PLDs) are semiconductor logic blocks that can be programmed after they are manufactured. The most common PLDs are Field-Programmable Gate Array (FPGAs). As integrated circuits become more complex FPGAs become more cost effective in electronic devices within communications, storage, industrial, consumer electronics and other end product markets. PLD chips will always be larger and slower than ASICs, but as more focus and energy is expended on design, more designs move to PLD.

 

Logic Cell Categories Diagram

 

“The cost of developing an ASIC, in general, doubles every generation. On 180nm, it was US$7-8 million, on 90nm it was in the neighborhood of US$40 million. As of yet, there are no ASICs on 65nm, but the development costs would be US$70-80 million.”

    -Xilinx CEO Wim Roelandts, Apr 2007

The programmable logic device (PLD) market is a duopoly with Xilinx and Altera controlling 85% of the market. From design win to customer beginning volume production can be two years so market share is a lagging indicator, but by all accounts Xilinx and Altera appear to be continuing to gain market share. An FPGA family typically reaches peak sales four to five years after introduction.

These two companies have taken a billion dollar of revenue from ASIC vendors over the past five years. The PLD market has grown a little less than 10% annually the past three years, but the market is expected to grow 10 – 15% annually over the next five years and the top two firms should grow earnings even faster. With the growth of embedded systems and the utilization of communication systems it is possible that the programmable logic market’s growth could even accelerate further. However, it may be a couple years before the PLD market growth begins accelerating.

In the Programmable Logic Device (PLD) market Xilinx and Altera are followed by Lattice with 7% market share, Actel with 6%, and Quicklogic with 1%. Over the next few years Xilinx and Altera should not lose or gain meaningful market share. These companies will grow because the four billion dollar PLD market is growing within the $72 billion semiconductor logic industry. PLD’s are receiving major designs wins in the overall semiconductor logic market specifically in products that used to be serviced by Application Specific Standard Products (ASSP) and the Application Specific Integrated Circuit (ASIC).

Every year PLD’s make more economic sense as designing and manufacturing semiconductor devices become more time consuming and more expensive. Initially just a prototyping tool, PLD’s can now cost effectively ramp up to 100,000′s of units. Some low cost PLD’s such as Altera’s FPGA Cyclone® series are now in devices selling in the low millions of units a year.

PLD’s offer a much more stable platform than other logic choices such as ASIC’s or ASSP where the devices have to be re-designed and re-tested every couple years. This can be a problem for products such as automobiles which typically are not re-designed more than once or twice per decade.

As more chips are embedded in different products the addressable PLD markets expands. The volume point where ASIC’s are more cost effective over PLD’s is now almost 100,000 units, five years ago it was 10,000 units. Due to this PLD is taking market share from the ASIC industry and ASSP industry.

While ways to measure semiconductor markets can vary widely the current markets that PLD can and is moving into are the ASIC market valued around roughly $15B, the ASSP market valued around roughly $15B, the very high performance DSP market valued around $3B, and the embedded processor market valued around $3B. If one was to include some of the high performance ASSP vendors such as Broadcom in the ASSP market it could be valued much higher (potentially around $45B), but the PLD vendors are not about to compete with these products.

May 15, 2008

GIGM Overview & Q1 2008 Results

Filed under: Investing,Platforms — Tags: , , , , — semanticzen @ 2:14 am

Gigamedia
GIGM is an online gaming company through its Everest Poker and Asian online gaming segment. Giga IPO’d on Nasdaq in February 2000 largely as an ISP in Taiwan. This is now a very small segment of the company which it is looking to sell. Giga’s management has proven to be solid allocators of capital with its successful acquisitions in online gaming.

Giga has agreements with several game companies, like Electronic Arts ERTS, to offer their latest games in Asia. It also has strategic investors in several Chinese game development companies from whom it will license games. The company also develops games in-house. An investment in Giga is a great opportunity to benefit from their two solid gaming platforms as well as their ability to make acquisitions and strategic investments.

The company expects to launch online sports betting in late 2008 through an acquisition or partnership. While the company expects flat sequential revenue growth through the seasonally weak summer it will launch several games in the latter portion of 2008.

Online gaming is an extremely profitable, high growth business which I will cover in more depth later. Tomorrow Giant Interactive reports Q1 results and the numbers should be very good. Below is an overview of GigaMedia and a detailed summary of their recent financial results.

Everest Poker

In April 2004, Giga acquired software developer and application service provider Grand Virtual Gaming Alliance and its subsidiary Cambridge Entertainment Software Limited the maker of Everest Poker. Everest Poker is the company’s largest business segment. Everest Poker is an online poker website that is very popular in Europe. Everest Poker has a multi-year advertising agreement with the World Series of Poker where it is the main sponsor of the world’s largest poker tournament.

Asian Online Games

The other major business is the company’s Asian Gaming segment which has over 60M registered users in Asia. In January 2006, Giga acquired FunTown the world’s largest online MahJong game site by revenue and a leading Asian online casual games portal with 5M registered users. At the time TCN had approximately 2o million registered users in China.

In May 2006, Giga began an exclusive partnership with online casual game company T2CN Holding (T2CN) through a $15M strategic investment. In January 2007, Giga acquired a majority of T2CN for $22.9M (18.3M shares or 40.3% of T2CN) to bring its total ownership above 50%. TCN is the operator of FreeStyle, an online basketball game, which is the largest online sports game in China.

T2CN has licenses to two 3D Internet games, Rush Online and Shenmue Online, which are multiplayer online role-playing games (MMORPG). More importantly it is the leading online casual sports game company in China and its game FreeStyle is the most popular online sports game in China. FunTown has developed almost all its games in-house and promotes stickiness by providing community aspects to the site such as

  • Game clubs for players
  • Tournaments related to FunTown’s online casual games
  • Social networking
  • Players ability to create an online persona such as an avatar

The FunTown and TCN units offer a merged online gaming platform.

Full Year 2007 Results

  • Revenue = US$166.9M up 77%
  • Operating Income = $38.1M up 73%
  • Net Income = $38.9M up 63% (had a one-time after-tax disposal gain of $7M in 2006)
  • EPS = $.65
  • Cash = $79.9M

Q4 2007 Results

  • Revenues = $47.7M up 59% (up 11% Q/Q)
    • Poker Software Revenues up 21% Q/Q
  • Operating Income = $9.3M up 16% (down 7% Q/Q)
  • Net Income = $10.7M up 8% (up 10% Q/Q)
    • Earnings up only 8% because spent 45% of revenue on advertising (vs. usual 30%)
  • EPS $.18

Q1 2008 Results

Giga reported record results yesterday.

  • Revenue = $54.6M up 51%
  • Operating Income = $12.9M up 49%
  • Net Income = $12.1M up 43% (up 13% Q/Q)
  • EPS = $.20 up 41% (up 14% Q/Q)
  • Cash = $79.9M
  • Gross Profit Margin = 79.0% vs 79.7% (78.8% in Q4 2007)
  • Operating Margin = 23.6% (19.5% in Q4 2007)

Guidance

Gaming software

  • Expects strong revenue growth for FY 2008
  • Expects Q2 revenues in line with Q1 (reflecting industry-wide slowdown due to summer seasonality)
    • May be offset by the launch of new products like casino games in Everest poker client and traditional Asian gaming products

Asian online games

  • Expects revenues to climb sharply in the second half of 2008, driven by major new game launches
    • In Taiwan and Hong Kong, expects major new game launches of: NBA Street Online, Holic and Hellgate: London
    • In China, expects to launch Holic in Q4 2008

Gaming Software

Q1 2008

Q1 2007

Change

Q4 2007

Change
Revenues

$38,301

$26,271

46%

$34,159

12%
Gross Profit

32,754

22,675

44%

29,734

10%
Operating Income

11,515

8,699

32%

9,818

17%
Net Income

11,396

8,292

37%

10,871

5%
EBITDA

11,913

8,858

34%

10,859

10%
Poker Software Vertical
  • Revenue = $29.7M up 56% (up 11% Q/Q), 77% of business unit’s revenue
  • 208,000 active depositing real-money customers played on poker platform up 14% Q/Q
  • Added 68,000 new depositing real-money poker players, up 19% Q/Q
Casino Software Vertical
  • Revenue = $8.6M up 20% (up 17% Q/Q)
  • Helped by rollout of new video slot games and cross-marketing to Everest poker players

Asian Online Games

Q1 2008

Q1 2007

Change

Q4 2007

Change
Revenues

$12,890

$5,471

136%

$10,074

28%
Gross Profit

9,395

4,258

121%

6,847

37%
Operating Income

3,708

818

 353%

1,219

204%
Net Income

2,557

1,037

147%

1,298

97%
EBITDA

3,665

1,488

146%

2,058

78%

 

Strong organic growth in FunTown in Taiwan and Hong Kong as well as the consolidation of T2CN in China

FunTown
  • Revenue = $7 up 28% (up 15% Q/Q)
  • Strong contributions from:
    • Advanced casual game Tales Runner
    • Favorable impact of effective mass media marketing
    • Successful MahJong game events around Chinese New Year holiday
    • Appreciation of New Taiwan dollar against US dollar
  • Average monthly active paying accounts = 111,000 down 5% Q/Q
  • Average monthly revenue per active paying account = $21.09 up 21%
  • Peak concurrent users = 43,000, down 12%
T2CN
  • Revenue = $5.9M up 48% Q/Q, Increased revenue from FreeStyle driven by:
    • New game patches
    • Marketing of game in conjunction with a hit movie
    • Increased online gamer activity resulting from severe snowstorm around and during Chinese New Year
    • Appreciation of renminbi against US dollar
  • FreeStyle
    • Average monthly active paying accounts = 514,000 up 43% Q/Q
    • Average monthly revenue per active paying account = $3.86 up 12% Q/Q
    • Peak concurrent users = 185,000 up 7%

Disclosure: I own Gigamedia and several other Chinese online gaming companies including GA, SNDA, and SOHU.

May 14, 2008

Next Gen Semi Design (part 3) – ASIC Market

Filed under: Platforms,Semiconductors,Technology — Tags: , , , , , — semanticzen @ 4:52 pm

The ASIC (Application Specific Integrated Circuit) Market

ASIC’s must be designed for a specific end product. These design and manufacturing costs have risen rapidly over the years as the geometry of semiconductors has gone from the millimeter to the nanometer level. The semiconductor manufacturing machines must be set for each ASIC, referred to as non-recurring engineering costs. Any bugs discovered after manufacturing an ASIC must be fixed with much slower software or the ASIC must be completely re-manufactured.

Since the complexity of designing an ASIC has increased dramatically many companies have outsourced ASIC design to third party firms which complicates IP ownership and potentially involves outsourcing what should be a core competency. As complexity, cost, and time to market has increased companies are looking to alternatives when building their digital products.

PLD’s are designed and manufactured once. Customers then write the software that these PLD’s will use. Generic or one time programmable processors are similar standardized IC that the customer uses to process the software it has written. By using a simpler PLD or generic processor it eases a company’s ability to in-source all of a product’s design while shrinking the time spent on product design and testing.

 

Characteristics

ASIC

ASSP

PLD

Custom Processor / DSP

Generic Processor

Customer’s Development Cost

Very High

Low

Moderate

High

Moderate

Average Selling Prices (ASP)

Low

Low to Moderate

Moderate to High

Low to Moderate

Low to Moderate

Time to Market

Slow

Moderate

Fast

Slow

Fast

Customizable

Yes

(by manufacturer)

No

Yes

(by customer)

No

Yes, only one time

(by customer)

Updatable in the field

(smooth product updates)

No

No

Yes

No

No

Performance

Very High

High

Moderate

Low to Moderate

Very Low

 

Clearly there is a tradeoff between speed (time to market), performance, and flexibility. The Cost-benefit of high-end PLD chips improves as small-geometry processes bring costs down while complexity of submicron designs increases cost of developing ASIC chips. The number of new ASIC starts has decreased from 12,000 in 1995 to 2,000 in 2002 and may not exceed 1,000 in 2008.

  • ASICs, typically require weeks to develop, plus have large up-front engineering costs
    • It can take a year to design an ASIC, plus more time to design into end equipment
  • PLD’s allow designers to adapt to changes in design throughout overall design process (from prototyping to production)
    • An engineer can design and program a high-density PLD in a matter of hours
    • Bugs and glitches can be fixed during early production
    • Features and functionality can be added while the product is deployed in the field
  • The ASIC market has far fewer design starts, but the ASIC designers typically have much larger budgets

The advantages of FPGAs over ASICs and ASSPs are design and product flexibility allowing users to reduce a products’ time to market and avoid high up-front cost of developing custom solutions. The disadvantages of FPGAs are higher unit costs than custom solutions and they also use more energy affecting battery life.

One of the next big growth markets for semiconductors is in the SoC / embedded market. On what devices will the next group of innovators and inventors build their products? Xilinx and Altera (along with one-time programmable processor maker Microchip) have the early edge; with the industries goliaths Intel, IBM, and TI currently offering less flexible products and development platforms. Who the semiconductor intellectual property vendors and end-product innovators embrace will determine which platform overtakes the shrinking market for product specific semiconductor devices (aka ASICs, ASSPs, etc).

Top Semiconductor Companies

Filed under: Investing,Platforms,Semiconductors — Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , — semanticzen @ 4:19 am

In conjunction with the micro-chunking of my paper on the next generation of semiconductor design I’ve compiled a list of the top semiconductor companies based on their market capitalization at the end of 2007.

I have not included vertically integrated companies like: Samsung, Toshiba, IBM, Hitachi, Sharp, Philips/NXP, etc. I’ve also excluded companies not listed in the West like: Renesas, Hynix, and Freescale. Based on how poor the memory market has been and typically is I’m not sure Renesas and Hynix would make the list and Freescale’s market share has been dropping so they would not be in the top 20.

 

Size

2007 Results

Symbol

Mkt Cap

Revenue

Profits

Industry Segment

    
1 Intel

INTC

113

37.3

6.3

 Processors  
2 Taiwan Semiconductor

TSM

45.5

9.7

3.9

 Fab  
3 Texas Instraments

TXN

41

13.7

2.6

 Analog & DSP  
4 Applied Materials

AMAT

24.2

9.7

1.7

 Assemby & Test  
5 Freescale Semiconductor

(private)

16.5

5.7

n/a

 Semiconductor Devices  
6 MEMC Electronics Materials

WFR

14.9

1.8

0.6

 Assemby & Test  
7 Nvidia

NVDA

13.5

3.8

0.7

 Graphics  
8 Broadcom

BRCM

12.5

3.7

0.4

 Networking  
9 STMicroeletronics

STM

11

9.9

0.8

 Semiconductor Devices  
10 ASML Holdings

ASML

11

4.5

0.8

 Assemby & Test  
11 Analog Devices

ADI

8.3

2.6

0.55

 Analog  
12 KLA-Tencor

KLAC

7.9

2.8

0.5

 Assemby & Test  
13 United Microeletronics

UMC

7.7

3.4

1

 Fab  
14 Infineon

IFX

7.3

10.2

-0.5

 Semiconductor Devices  
15 Sandisk

SNDK

6.4

3.8

0.1

 Memory  
16 Marvell Technology

MRVL

6.4

2.7

-2

 Semiconductor Devices  
17 Maxim

MXIM

6.4

1.7

0.5

 Analog  
18 Xilinx

XLNX

6.2

1.8

0.4

 Programmable Devices  
19 Linear Technology

LLTC

6.2

1.1

0.4

 Analog  
20 Microchip Technology

MCHP

6.2

1

0.3

 Processors  
21 Altera

ALTR

5.9

1.3

0.3

 Programmable Devices  
22 LAM Research

LRCX

5.4

2.4

0.6

 Assemby & Test  
23 Micron

MU

4.9

5.7

-0.7

 Memory  
24 National Semiconductor

NSM

4.9

1.9

0.3

 Analog  
25 Advantest

ATE

4.8

2

0.3

 Assemby & Test  
26 Advanced Semiconductor

ASX

4.5

3.1

0.6

 Packaging & Testing  
27 Siliconware Precision

SPIL

4

1.8

0.4

 Packaging & Testing  
28 AMD

AMD

3.9

6

-2

 Processors  
29 Novellus Systems

NVLS

2.9

1.7

0.2

 Assemby & Test  
30 Intersil

ISIL

2.9

0.7

0.1

 Analog  
31 LSI

LSI

2.8

2.4

-0.4

 ASIC  
32 ARM Holdings

ARMHY

2.8

0.5

0.1

 Processors  
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