Lower prices, lower growth

Staff -- Purchasing, 1/13/2005

Digital signal processors (DSPs) will post 6.9% growth in 2005 as the market grows to $8.4 billion. That's a far cry from the 28.2% growth that occurred in 2004.

But that's good news for prices. Buyers can expect DSP price tags to fall because of weakened demand and because faster DSPs with higher price tags will cut the prices of previous generation DSP.

"As we bring on 1 GHz DSPs, we are moving down the price of DSPs that had been previously highest performance," says Leon Adams, worldwide DSP product marketing manager for Texas Instruments. "We cut the price of our 720 MHz DSP in half when we introduced the 1 GHz."

Overall DSP price tags will fall from an average of $5.60 in in 2004 to $5.32 in 2005, says researcher IC Insights.

Wireless infrastructure equipment and cell phone handsets will continue to be the major customers for DSPs. Every cell phone has a DSP and the chips are also used in cellular base stations. DSPs are also used in a variety of equipment ranging from electronic toys to global positioning satellite systems to medical equipment.

And expect the wired communications equipment industry to become a bigger user of DSPs as it recovers from its 2001 decline.

DSP demand from telecommunications equipment manufacturers also has bounced back. "We started to see increasing demand not only for classic telecommunications equipment such as switches, but also voice-over packet, as broadband to the home is getting more penetration," says TI's Adams. (Voice-over packet equipment allows telephone conversations over the Internet or on a dedicated Internet protocol network instead of dedicated voice transmission lines.)