Expect more supply, lower tags for DSPs

By Gina Roos -- Purchasing, 2/22/2001

The market for digital signal processors (DSPs) is forecast to grow at a compound annual growth rate of 33% through 2005 despite some softening in the global economy, according to market researcher Forward Concepts. The worldwide DSP market will reach $25.6 billion in 2005, up from $4.4 billion in 1999.

The DSP market is up about 33% in 2000, which makes it about a $6.1 billion market, says Will Strauss, analyst for Forward Concepts, Tempe, Ariz. Market leaders include Texas Instruments Inc. (TI), Lucent Technologies, Motorola Inc. and Analog Devices Inc. (ADI).

The digital wireless market is still the biggest driver in DSP market growth, making up nearly half of the DSP market, Strauss says. There are a number of other markets such as ADSL and traditional hard disk drive controllers that are substantial, but they're not growing as fast as digital wireless, he says.

A DSP is a type of processor that processes data in real time, taking a digital signal and mathematically processing it to improve the signal. This capability of improving signals is opening up huge opportunities in emerging markets such as Internet audio and broadband to the home.

The emerging Internet audio market is expected to be a hot market for DSPs this year, expanding beyond portable MP3 players into MP3 jukeboxes, CD players, digital still cameras and cell phones, according to Forward Concepts. This market reached a sell-through level of four million units in 2000.

TI's DSP shipments for Internet audio applications reached two million units in November 2000. TI's fourth-generation Internet audio DSP, the DA250, available in October 2000, incorporates advanced power management technology that allows for up to 70 hours of Internet audio playtime on a portable player using two AA batteries.

TI forecast about 30% growth in DSP demand last year and expects to match that growth rate in 2001 with wireless and broadband markets leading the charge.

"We still see the high growth rates in wireless that we've seen in past years. We would like to see 2.5G and 3G activity come on sooner. That will keep the market growing at a very rapid rate," says Phil Campbell, director of DSP strategic initiatives, at Texas Instruments Inc., Houston, Texas.

"The wireless segment still offers tremendous growth and emerging portable markets such as digital still cameras, and other handheld devices offer opportunities for growth," agrees Phil Davies, production line director for the embedded DSP at Analog Devices Inc., Norwood, Mass. Davies also reports strong growth in automotive, consumer and industrial applications.

Another key reason for increased demand for programmable DSPs is price. DSP manufacturers expect to introduce a myriad of new DSP devices in the sub-$5.00 range in 2001, which makes them very attractive for new markets.

Although DSP demand is growing at a fast clip, availability for DSPs has improved. While there were some supply constraints and allocation in early 2000, supply is just about in balance with demand, Strauss says.

Manufacturers report that DSP leadtimes average about four to eight weeks with very few exceptions and will remain in this range at least during the first half of 2000. Catalog customers and those who require small quantities can typically get DSPs off the shelf from large distributors. Manufacturers report no production capacity challenges.

Severe price reductions are also slowing. Strauss says there was a slowdown in the decline of the average selling price (ASPs) for DSPs in 2000 because of greater functionality of the DSPs. "Where we have seen price drops in the 15% range annually it has slowed to about 5% as more functionality is added to the chip," he says.

However, some manufacturers still report downward price pressure from some customers depending on the type and complexity of the DSP.

Pricing for general-purpose DSPs will remain relatively stable, says Jerry McGuire, production line director for general purpose DSPs at ADI. "But what you now get at any price point is more MIPS ."

Improvements in design

The majority of leading DSP manufacturers are working on several key design points that make the DSP easier to use, more flexible and lower cost for broader utilization.

Manufacturers are developing more flash-based devices to address lower-performance applications and hybrid architectures that combine DSP capabilities with MCU functionality. In addition, they are improving processing power by doing things such as adding more multiply-accumulates (MACs) to a single chip while still trying to maintain power consumption levels in key applications.

Manufacturers say it's both high-performance network connectivity and cell phone applications that demand higher processing power. As the cell phone market migrates from 2G to 3G products, they need more horsepower to handle the various industry standards and multimedia functionality.

To keep up with a dramatic increase in demand for programmable DSPs, manufacturers are developing more powerful product lines loaded with new functionality and memory while addressing key customer issues such as lower cost, lower power consumption and time to market.