The Big Get Bigger in Comm ICs
2014 Deals Have Consolidated Several Top-25 Vendors
By Bob Wheeler
At the top level, the communications-semiconductor industry declined modestly in 2013 following down years in 2011 and 2012. The overall market for application-specific standard products (ASSPs) was relatively healthy, however, with segment-specific issues creating a drag on broader growth. The two largest segments, Ethernet and broadband, were flat to slightly up. In both cases, revenue growth from new technologies offset declines in legacy technologies. Ethernet chips represented 37% of total ASSP revenue, whereas broadband chips contributed 26%.
The remainder is fragmented into many smaller segments, each generating 6% or less of total ASSP revenue. The largest of these segments, home-networking chips, contracted in 2013 owing not to poor technology adoption but to integration of Moca ports in set-top-box SoCs, which we exclude. The next-largest segment is merchant network processors (NPUs), the growth of which has stalled as many legacy designs reach their end-of-life. In particular, the shift from 3G to LTE infrastructure build-outs has reduced demand for access NPUs. Most active NPU vendors, however, are growing.
Another relatively large segment in transition is optical-transport ICs. This segment grew in 2013 as rising OTN sales more than offset declining sales of legacy Sonet/SDH components. The once crowded field of framer and mapper vendors is consolidating, since few invested in the newer technology.
Vendors Ride Technology Waves
Table 1 shows the top 25 vendors of wired-communications ASSPs, ranging from top-ranked Broadcom to number-25 EZchip, which contributed only 1.0% of total revenue. As the leader in both broadband and Ethernet chips, Broadcom dominates overall comm-IC revenue, but its 2013 revenue and share were both virtually flat. The company’s leading position in the growing 10G Ethernet segment drove share gains in overall Ethernet chips, however. Another bright spot was PON, which offset a DSL-revenue decline.
Table 1. Worldwide revenue of the top 25 vendors of wired-communications ASSPs (millions of dollars). The ranked vendors generated 95.6% of total revenue, but only the top 10 contributed more than 2% each. (Source: The Linley Group)
Having such a commanding position, Broadcom’s challenge is to maintain overall growth. In 2013, 10GbE and PON growth was insufficient to lift the top line. The company does, however, have several opportunities. It plans to reenter the server-connectivity market, perhaps with 40G Ethernet controller chips. It is also shipping HomePlug AV chips for power-line communications as well as OTN mapper devices, but it has little share in these categories. On the downside, leading Chinese OEMs such as Huawei and ZTE are increasing their use of internal ASICs, which pose indirect competition to Broadcom’s ASSPs.
Intel grabbed second place from Marvell thanks to strong growth in 10G Ethernet controllers and cable modems. The company gained share in both segments, which also expanded as a whole. It also increased its Gigabit Ethernet controller revenue, gaining share in a declining segment. Aside from Broadcom, Intel is the only other vendor with major share in both the broadband and Ethernet categories, but its products for these segments have little to do with each other. The company’s Ethernet products have strategic ties to servers and, more generally, data centers. Intel’s cable modems, however, seem like orphans after the company’s divestiture of set-top boxes.
In addition to organic growth, Intel will expand its 2014 comm-IC revenue by acquiring the former LSI networking business (see NWR 9/1/14, “Intel Buys Axxia for Base Stations”). The ASSPs it is purchasing include legacy NPUs, Sonet/SDH framers and mappers, and media processors. Because we count the growing revenue from Axxia processors in our embedded-processor category, we do not expect the former LSI products to generate growth in wired-comm ASSPs beyond 2014.
Marvell’s fall to third place owed primarily to share losses in Ethernet chips. The company yielded share in the mature Gigabit Ethernet market and, more importantly, in the fast-growing 10G Ethernet market. On the positive side, it gained PON share, solidifying its beachhead in broadband CPE. Execution problems have left Marvell with little presence in the growing data-center networking market. The company will likely supply 10GBase‑T PHYs to Cisco but is otherwise missing out on 10GbE-fueled growth. Marvell’s best near-term prospects are in Carrier Ethernet, where its refreshed product lineup should take some share from Broadcom.
Fourth-ranked Lantiq posted 10.7% revenue growth, boosting its share by 0.6%. Nearly two-thirds of its 2013 revenue derived from DSL ICs. Lantiq performed especially well in VDSL2 CPE chips, where it primarily competes with Broadcom. Many of the company’s other products serve declining legacy segments, impeding overall growth.
Rounding out the top five, Qualcomm grew modestly owing to greater revenue in home-networking ASSPs. Qualcomm Atheros is the leading vendor of chips for the HomePlug AV power-line networking standard. The company also supplies PON chips and low-cost Gigabit Ethernet chips.
Turning the Corner
Among traditional comm-IC suppliers, Lantiq and AppliedMicro stood out in 2013, outperforming others in their respective wired-comms segments. Both vendors have built growing product lines around newer technologies, finally relegating legacy products to a minority role in communications revenue contribution. Many of their contemporaries have been unable or unwilling to make this transition. LSI and PMC-Sierra invested more in other markets, particularly storage, hoping for better growth and diversification. Cortina remained focused on wired communications but was saddled by many legacy products; its declining revenue led to its recent acquisition by Inphi (see NWR 8/18/14, “Inphi Snaps Up Cortina”).
Aside from Lantiq and AppliedMicro, three smaller vendors posted double-digit percentage growth in 2013. PLX Technology was the only vendor actively developing PCI Express switch chips and was recently acquired by Avago (see NWR 7/7/14, “Avago Acquires PLX for PCI Express”). IDT is the only active vendor of RapidIO switch chips, demand for which grew thanks to wireless-base-station shipments. At the bottom of our rankings, EZchip is the leading network-processor vendor; it grew 30% owing to demand for service-provider routers. These highly specialized vendors demonstrate that patience can eventually lead to dominant positions in small but profitable segments.
Top Vendors Keep Growing
Barring any fourth-quarter surprises, Broadcom, Intel, and Marvell should all deliver strong 2014 revenue growth in wired-comm ASSPs. Fueled by demand from data centers and carriers, Broadcom’s Ethernet products are seeing double-digit percentage growth year over year. The company’s broadband-modem products are also performing well, although they are failing to match the growth in Ethernet.
Marvell is also expanding its Ethernet revenue by selling switch and PHY chips to enterprise customers, and switch shipments should continue to grow as new 28nm designs ramp into production. Intel’s Ethernet business should benefit from the Grantley server-platform launch, which will increase server shipments during 2H14. The company’s cable-modem shipments are rising as carriers deploy DOCSIS 3.0 designs with 16 or 24 bonded channels.
Over the longer term, trends like software-defined networking (SDN) and network-functions virtualization (NFV) will also change the silicon landscape in communications. SDN is spawning new entrants in Ethernet switching, threatening to disturb Broadcom’s data-center dominance. NFV is enabling home-gateway functions to move into the cloud, potentially undermining the rising value of broadband-gateway SoCs. On the data-center side, Intel stands to gain as network functions move to server-like platforms. Thus, despite its maturity, the communications market now appears surprisingly dynamic.
This article contains excerpts from The Linley Group’s recently published report Communications Semiconductor Market Share 2013. This report provides market-share data for 20 communications-semiconductor categories, including Ethernet products, broadband interface chips, embedded processors, FPGAs, and interconnect chips. It is available now from The Linley Group for a list price of $3,995. For more information, access www.linleygroup.com/comms-share.