The programmable logic device (PLD) market will decline 3% this year because of weak demand especially from the communications equipment industry. Growth won't return until 2003 when the PLD market rises 25%.

The good news for buyers is that PLD manufacturers such as Xilinx, Altera, Lattice are boosting the number of usable gates per PLD. That means while prices may increase per PLD, the price per usable gate will decrease dramatically, while functionality increases.

The PLD market will decline for the second straight year although the decline in 2002 will be nothing compared to the decline in 2001. The PLD market grew 88% in 2000 to $5.6 billion, according to market researcher IC Insights. But in 2001, PLD revenue fell 60% to $2.2 billion and will decline to $2.1 billion in 2003. The steep drop reflected the decline of the telecommunications industry, which is a major user of PLDs. The PLD industry will resume growth in 2003 and by 2006, become a $3.6 billion market.

The PLD market fell because demand from such big companies as Lucent, Cisco and Nortel dried up. As a result of weak demand inventory levels built up and prices dropped.

Declining PLD tags are unusual because the average price per PLD usually increases because PLD manufacturers are continuously increasing the number of usable gates per PLD. For instance the average price of a PLD was $3.73 in 1994. By 2000 that increased to $10.45, but in 2001 plummeting demand caused the price to fall to $9.30.

Despite weak demand, prices for PLDs will rise again because the number of transistors and gates per chip will increase faster than the price per function decreases. The average PLD price will rise to $11 by 2006, according to IC Insights.

While the price per PLD will increase, the price per transistor and price per gate will decline dramatically. In 2000 the price per usable gate was 0.04 cents. In 2001 it declined to 0.0023 and by 2006 it will drop to 0.005.

The price per usable gate will fall as manufacturers continue to increase the density of PLDs. In 1994 the number of usable gates per PLD was 533. By 2001 it increased to 40,435 and by 2006 it will further increase to 220,000, says IC Insights.

The number of usable gates is increasing because IC foundries are advancing their manufacturing processes. Processes are using finer feature sizes as well as increasing metal interconnection layers. The advances allow PLD producers to use leading edge technology such as copper interconnect.

Manufacturers are also reducing the price per gate by using 300 mm wafers for production instead of 200 mm wafers and converting to so-called "hardwired" versions for high volume runs. Xilinx expects that its cost will be cut in half for its 2V6000 PLDs this half. With a hard wired or mask produced PLD, the die size is reduced 70%. That results in a PLD cost savings of 50-80% compared to a standard processed PLD, according to IC Insights.

As the price declines, more PLDs are replacing gate arrays in many applications. PLDs are often the preferred over gate arrays because they are programmable and gate arrays are not. PLDs' price per gate is about twice that of gate arrays, although eight years ago it was 10 times. Some manufacturers are targeting pricing that would reduce price per gate the cost to 1.5 times more than gate arrays. As the price declines, it will open up applications for PLDs.