August 2010

On Wednesday, September 1, 2010, GLOBALFOUNDRIES will be hosting its inaugural Global Technology Conference in Santa Clara. Attendance should be high as we all try to find out what GLOBALFOUNDRIES has up their sleeve to woo new business.

These technology forums are a great way to get broad audience coverage but all the big foundries are targeting the largest and the most advanced semiconductor manufacturers. As I prepare my next foundry report, I can see why big customers are so important. In 2009, TSMC reported that their 10 largest customers accounted for 53% of their total net sales. Back in 2000, TSMC’s five largest customers comprised 30.6% of their total sales. UMC’s top 10 customers account for 65.3% of total revenues and SMICs five largest customers account for 60% of their total sales. In 2008, Chartered Semiconductors top five customers comprised more than 63% of their total sales and with the combined sales of GLOBALFOUNDRIES that percentage is even higher now.

All of the interesting gizmos get the attention of the mainstream media and even the industry press.  The various smart phones, IPTV, iPads and other devices that connect to the internet, especially via wireless, generate a great deal of excitement and sales.

However, these devices need an infrastructure to support them. As more devices come into use and the bandwidth demand increases to support advanced apps, the service providers are under pressure.  They need to deliver quality service at an acceptable price and still make a profit.  The concern over running out of internet addresses for all of these devices has been raised recently.  This is IPv4 which uses 32-bit address.  The industry is moving to IPv6 which uses 128-bits.  However, the deployment for IPv6 is still very low.

In recent weeks two companies have made significant product announcements to address the needs of the communications infrastructure.

In July 2010 NetLogic Microsystems launched the NLX321103A, a three chip set that handles a broad range of packet-processing functions at speeds up to 40Gbits/sec.  This comes out of the acquisition of RMI Corp. (June 2009).  The NLX321103A includes RMI’s 8-core, quad-threaded XLR processor.  This is a MIPS64 based design for which the company holds an architectural license.  NetLogic’s solution will enable platforms, such as mobile infrastructure, to reduce the bill of materials (BOM) and increase performance.  It also supports IPv6.

Apple reported in its last financial results that as of June 26, 2010 it has shipped 3.27 million iPads.  This is the first quarter of availability for the iPad.  It is shipping at the rate of about 1 million units per month.  However, keep in mind that there was a large amount of pre-orders prior to its April launch.

The question is can Apple ramp up production to meet demand?  Apple’s Steve Jobs has stated since its launch that demand for iPad has been stronger than expected.  Apple has been rolling out iPad to markets outside the US in select countries at different times rather than an all out world wide blitz.  On May 28 Apple made iPad available in Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland and the UK.  On July 23 Apple extended this to Austria, Belgium, Hong Kong, Ireland, Luxembourg, Mexico, Netherlands, New Zealand and Singapore.

This steady roll out may help Apple manage its supply issues.  Recently, the supplier of the iPad’s display, LG said that it was unable to keep up with demand.  Apple has signed on Samsung as a second manufacturer.  Flash memory is an important component for iPad.  There has been strong demand for Flash for many devices.  Apple’s iPad has to compete for this supply.