Hillsboro, Oregon-based Lattice Semiconductor Corporation (LSCC) is a fabless original equipment manufacturer (OEM) of programmable logic devices (PLDs), including in-system programmable (ISP) devices. Lattice also provides related software development tools and other programmable analog and mixed-signal devices. The company has entered the high-growth FPGA market through the acquisition of Agere's FPGA division. Management expects to make significant inroads into the low-end, high-volume segment of the FPGA market.
Semiconductor devices are broadly divided into three categories analog, digital and radio frequency (RF). Analog semiconductors condition and regulate real world information such as light, temperature, speed, pressure, power and electrical currents. Digital logic semiconductors process information in only two states. Mixed-signal semiconductors combine both analog and digital technology into a single device. Typically, an analog sensor samples real world information, and then converts the input into an electronic analog signal, which is converted into a digital format for further digital processing. The analog and mixed-signal markets tend to be more varied and specialized, with customized products that have longer life cycles than those in the digital industry segment. There is an ongoing drive to decrease the number of discrete devices, lessen power requirements and shrink the size of the existing devices, which correspondingly increase performance and reliability. Consequently, a greater amount of functionality is being consolidated into increasingly smaller devices.
The Gartner Group has released its final estimates for 2006, according to which, semiconductor sales grew 10.2% to $262.7 billion. The latest SIA report pegs it at $247.7 billion, up 8.9% over 2005. The market is expected to grow 10% to 273.8 billion in 2007. The programmable logic component is estimated to be a $3.7 billion market (1.4% of the total market). The two sub-segments within programmable logic are FPGA and PLD, which were $3.0 billion and $0.7 billion markets, respectively, in 2006. Lattice's products cater to both portions of the programmable logic market. The company reports revenue along these two segments, each of which represents a distinct architectural approach. The revenue contribution from PLDs was 82% and 80% of total revenue in 2005 and 2006, respectively, while the contribution from FPGAs was 18% and 20%, respectively.
A semiconductor-based electronic system uses digital logic to control and enable interaction between different functional electronic modules within a system. An electronics system designer can either piece together multiple off-the-shelf components or opt for a single application specific integrated circuit (ASIC) chip. While most ASICs are hard-wired, or non-modifiable customized devices, FPGAs are more complex ASICs that can be modified, and consequently, have higher production costs. Usually, the flexibility benefit of an FPGA isn't worth the incremental cost of a hard-wired ASIC, especially within a production system that most likely will not require any future changes. Typically, a designer uses a FPGA in the pre-production system and then switches to a hard-wired ASIC in the production system. The lower per unit cost is the primary reason that the hard-wired ASIC market is 10x as large as the programmable ASIC market.
As a fabless OEM, Lattice outsources most of its manufacturing operations to companies such as Seiko Epson and Fujitsu of Japan, Chartered Semiconductor of Singapore and UMC of Taiwan. The manufacture of products by external sources has lowered capital investment requirements, allowing LSCC to dedicate internal resources on the research and development process instead.
Lattice's customers are original equipment manufacturers (OEMs) primarily in the communications and computing markets, although it also serves applications in the industrial, automotive, medical, consumer and military end-markets. The industrial and other segment is currently the strongest growing. The revenue contribution by end market in 2006 was communications 50% (up 13.0% over 2005 levels), computing 16% (up 4.8%) and Industrial & Other 34% (up 28.5%). Geographically, the company generated 20% of revenue from the U.S. (up 2.2% over 2005), 23% from Europe (up 12.4%), 20% from the Asia Pacific region excluding China and Japan (up 29.5%), 13% from Japan (up 1.2%), 17% from China (up 46.6%) and 7% from other regions (up 17.3%).
Lattice is already a fabless company and management is taking steps to transfer most of the domestic R&D activity to its Shanghai center, thus lowering costs significantly. Therefore, there appears to be even more room for cost reductions.
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