March 21, 2005
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Jack Horgan - Contributing Editor

by Jack Horgan - Contributing Editor
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Most of what I have written and read about semiconductor industry has been regarding the digital world. There is of course another world, the analog world, and in between mixed signal.

According to a study by IBS Group 20 percent of the area, 40 percent of the design effort and 50 percent of the design re-spins. The same firm observed significant growth in the mixed-signal system-on-chip over the last five years and expects a growth rate of the order of 40 percent in the next five years. By next year it is expected that 75 percent of all silicon-on-chips will contain some analog component. The table below shows some data taken from the Autumn 2004 forecast of the WSTS.

A similar view is expressed in the table below by a Databeans forecast issued January 2005:
What is an analog circuit? Linear Technology defines linear or analog circuits as circuits that monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or speed, and play an important role in bridging between real world phenomena and a variety of electronic systems. Linear circuits also provide voltage regulation and power control to electronic systems, especially in hand-held battery powered systems. Other vendors in this market space have a similar definition of analog circuits.

Examples of analog circuits include:
Because of the varied applications for linear circuits, manufacturers typically offer a greater variety of device types to a more diverse group of customers, who typically have smaller volume requirements per device. As a result, linear circuit manufacturers are often less dependent upon particular products or customers; linear circuit markets are generally more fragmented; and competition within those markets tends to be more diffused.

Sales in America and Europe have generally declined over then past 5 years as customers shift more of their manufacturing operations to Asia and as demand for product has grown in Asia.

The process to produce integrated circuits typically consists of the following steps:
- Wafer Fabrication is a series of complex precision processes that include oxidation, lithography, chemical etching, diffusion, deposition, implantation and metallization.

- Wafer Sort where the silicon wafers are tested and separated into individual circuit devices.
- Product Assembly

- Final Test uses computerized circuit testers and, for certain applications, environmental testers such as burn-in ovens, centrifuges, temperature cycle or moisture resistance testers, salt atmosphere testers and thermal shock testers.
The companies discussed in this week's commentary often perform wafer fabrication in the US or other “high cost” countries, while assembly and test operations are located in low cost countries such as China, Malaysia and the Philippines.

Industry analyst iSuppli has issued a report ranking vendors by market share in the Analog market. The table below shows the rankings.
In the tables that follow the fiscal year rather than the calendar year is used. For the vendors in question, the end of fiscal year 2004 is listed in the table below.
National Semiconductor Corporation (“National”) was originally incorporated in 1959. Its headquarters have been in Santa Clara, California since 1967. It employs around 9,700 people. The company offers more than 15,000 products. The firm describes itself as:
“National Semiconductor, the industry's premier analog company, creates high performance analog devices and subsystems. National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, communication interface products and data conversion solutions. National's key markets include wireless handsets, displays, PCs and laptops. The company's analog products are also optimized for numerous applications in a variety of electronics markets, including medical, automotive, industrial, and test and measurement.”
National's 5 year financials are presented in the table below. Analog has averaged around 80% of the revenue.
In fiscal 2004 analog products accounted for 84% of sales. The remaining 16% that are not analog or mixed-signal include microcontrollers, advanced I/O, connectivity processors and embedded Bluetooth solutions. Sales growth in fiscal 2004 was essentially all due to the Analog segment. Growth in Analog segment sales was driven by higher consumer demand for products such as wireless phones and notebook computers, and also because of a general trend towards increased analog semiconductor content in a variety of electronic products. Within the Analog segment, sales of power management products led the growth in sales with an increase of 35 percent from sales in fiscal 2003.
For fiscal 2004, sales increased in all geographic regions compared to fiscal 2003. The increases were 35 percent in Japan, 21 percent in the Asia Pacific region, 16 percent in Europe and 8 percent in the Americas. Sales in fiscal 2004 as a percentage of total sales remained flat at 46 percent for the Asia Pacific region and 20 percent in Europe. Japan increased to 13 percent of total sales while the Americas decreased to 21 percent. In 2001 US and UK accounted for 33% and 11% of sales respectively.

During fiscal 2004, National's operations were organized in the following six groups: the Analog Group, the Displays and Wireless Group, the PC and Networking Group, the Custom Solutions Group, the Imaging Group, and the Information Appliance Group (which was ultimately disbanded in early fiscal 2004). In late August 2004, National announced the sale of its imaging business to Eastman Kodak Company to focus its investments on resources that support the core analog areas.

The Analog Group designs, develops and manufactures a wide range of products including:
- power management products (power conversion, regulation and conservation);

- high performance operational amplifiers;

- high performance analog-to-digital converters;

- high efficiency audio amplifiers;

- thermal management products.

In fiscal 2004, nearly 43 percent of the Analog Group's revenues were derived from original equipment manufacturers, while the remaining 57 percent came from our worldwide authorized distributors. Major oems include HP, IBM, LG Electronics, L.M. Ericsson, Motorola, Nokia, Samsung, Siemens, and Sony.

The Analog segment sales for the first half of fiscal 2005 remained higher than sales for first half of fiscal 2004, driven by higher consumer demand for products such as wireless handsets and notebook computers, and a general trend towards increased analog semiconductor content in a variety of electronic products. However, efforts by distributors and customers to reduce inventories combined with lower than expected demand patterns caused sales in the second quarter to decrease from the level in the corresponding quarter of fiscal 2004. In connection with these inventory adjustments, demand for our analog products was weak in the Asian wireless handset market and flat-panel displays market.

Analog Devices, Inc (ADI) was founded in 1965. The firm specializes in high performance analog, mixed-signal, and digital signal processing integrated circuits. High-performance devices are generally defined as devices that support a minimum of 10-bits of accuracy and a minimum of 50 megahertz of speed. The firm has wafer fabrication facilities for high-performance analog products are located in Massachusetts, California, and Ireland. Product test is conducted at facilities in the Philippines. Corporate headquarters is located in Norwood, MA. ADI currently has a worldwide workforce of approximately 8,900 employees, including over 3,000

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-- Jack Horgan, Contributing Editor.


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