Amadeusz Juskowiak

Technologychip industry seeks custom designs

US semiconductor manufacturers struggling to stem a river of red ink are increasingly looking toward customized designs rather than massmarket chips for future profits

The market for customized chips semiconductors designed for a very specific application or product is expected to expand by 25 to 30 pct this year compared with only about six pct for the entire integrated circuit industry

Market researcher Dataquest Inc estimates that sales of customized chips totaled about 45 billion dlrs worldwide last year about 12 pct of the total chip market By 1990 however customized chips are expected to represent a 12 billion to 15 billion dlr market about 25 pct of total chip sales

More important for their vendors because they are not a standard design customized chips represent a sellers market and prices and profit margins can be set accordingly

High volume memory chips have become a perfect commodity market Robert Brodersen a professor of electrical engineering at the University of California at Berkeley told an industry forum

The product is interchangeable between one manufacturer and another and customers base their buying decisions almost entirely on price Brodersen said

He predicted that in the next few years only a handful of the worlds largest chip manufacturers most of them Japanese will produce memory chips the standard electronic component found in everything from digital watches to computers The rest of the industry just wont be involved

Last weeks International Solid State Circuits Conference the chip industrys annual forum for new developments seemed to support Brodersens prediction

Of the 116 papers presented at the conference some 40 pct had Japanese authors the first time they have outnumberd the United States Most of the Japanese chip designs were in the memory category including Nippon Telephone and Telegraph Cos attentiongrabbing 16 mln bit dynamic random access memory dram chip 16 times more powerful than anything now available

The most advanced memory chip described by a US company was International Business Machine Corps IBM four mln bit chip and IBM only manufactures chips for its own internal use not for the open market

The problem with memory chips is that they are all based on the same well known design standards so they are easy to copy and inexpensive to manufacture Because such large Japanese conglomerates as Sony Corp SNE NEC Corp NIPNY Matushita and Mitsui have their own enormous consumer and electronics product lines they also have a guaranteeed internal market for their chips so they can produce huge amounts at a very low cost per unit

Customized chips however are designed for a specific customer manufactured in small quantities and expensive relative to standard chips Computer markets are increasingly looking to customized chips because they are difficult to copy thus making the final product harder to clone as well

Intel Corp INTC the leading manufacturer of the microprocessors that form the brains of most computers alerted the industry to its intention to switch to customized chips last fall

The company which just reported a loss for 1986 said it will spend 75 mln dlrs over the next three years to turn itself into a leading manufacturer of custom and semicustom chips

Intel joins some 275 companies already competing for a piece of the customized chip business but it has an advantage that the others do not IBM which owns a 20 pct stake in Intel has agreed to share the designs for many of the 15000 chips it makes for its own use Intel will customize those designs and sell them to others

It will also get to use IBMs proprietary computer system for designing chips considered by experts to be one of the most advanced in the world

Intels success is still not guaranteed however Industry analysts noted that it is far different to design a mass market item than a customized chip that requires a close working relationship with the customer

Intel spent five years and 100 mln dlrs developing its newest 30386 microprocessor A much faster turnarouond time and much lower development costs will be required for customized chips if the firm is to succeed